But what's funny is that it's ironic and no one knows it.
The idiom is from Mark Twain novels--and he uses it when the character is saying he's telling the truth but is actually lying.
It's historical origin is in Native American cultures, they didn't recognize any necessity for truthfulness. Pre-Columbian peoples always promised one thing and did another, and no one believed their promise.
But when Euros came, they got a promise from the natives and then the promise didn't come through and they thought they were betrayed, but they didn't understand the nature of native philosophy.
So, when someone says "honest injun" as a way of assuring you that they are telling the truth--call them on it.
*disclaimer: dhampy finds no offense in the word 'injun' because he is one*