This originates from ancient Israel. At the time, and some would say the same of today, it was dangerous to get involved with other peoples because of their actions. Most (if not all) of the nations around Israel worshiped many gods, and involving oneself with such people could cause him/her to turn away from their God.As for the chosen people, if there is zero connotation then why are Jews not allowed to marry non-Jews?
Also, some nations had very... terrible practices, such as burning of a child to an idol (no offense intended to anyone who considers this an acceptable practice). Such actions would be very disapproving before God.