Liberty cabbage is a bowdlerization of the word "sauerkraut." It was used most in the first half of the twentieth century, mostly during World War I. Similar euphemisms, some of which did not spring up until World War II, include "liberty measles" for "German measles," "Eisenhower jacket" for "Hindenburg jacket," "Eisenhower herring" for "Bismarck herring," and others. In fact, French toast got its name during the WWI bowdlerizations. A couple of the bowdlerization patterns involved replacing "German" with "Liberty" and various military and political figures with Dwight David Eisenhower.
This phrase is very Germanophobic in its nature. It is generally more tactful to simply say "sauerkraut" or "kraut" than risk offending any Germans.
This euphemism is similar to the 2003 Iraq war era "Freedom fries."
