An entertaining, but probably apocraphyl, etymology of ‘hep.’
Hep or Hip. “With it”—wise to what is happening. According to David Maurer in The American Confidence Man, it came from a misunderstanding of the original usage, which came from the name of an 1890’s Chicago saloon owner, Joe Hep. His place was a grifter hangout, but he didn’t know it. Evidently, he thought all his customers were just businessmen and salesmen. The story goes that when a musician or other stranger was brought over to a con man table, the question “Who’s your friend?” was answered, “Oh, he’s Joe Hep.” This meant the guy didn’t have a clue and it was all right to talk around him using grifter’s slang. The “friend” usually misunderstood, and taking it as a compliment, thought that “Hep” meant “with it” or “cool,” and that is how the term gravitated into the musician’s lingo.