Whig history is created by looking back and selecting "winners" of historical encounters, specifically those which resulted in the "improved" modern world we live in today. The problem with a whiggish interpretation is that not only does it gloss over important details and events, it also results in massive mischaracterizations of historical people and events. Martin Luther, to give a popular example, is a fighter for religious freedom, not a horribly anti-Jewish totalitarian conservative.

I suggest you pick up a copy of Herbert Butterfield's "The Whig Interpretation of History", the book that first coined the term. It's a short read, and will give you a solid understanding of what you should be looking for. In the same vein, I'd also recommend D.H. Fisher's "Historians' Fallacies", although this latter book does have some weird bits of racism randomly scattered through it, and probably desperately needs a new edition.

'Whig History' is a flawed approach because it imposes a particular conception of an inevitable march towards progress or enlightenment, and often mischaracterises people into 'heroes' and 'villains' on their relation to this idea of progress.

It also can be bad because it essentially assumes that the result of events was both inevitable and 'good' - for example the Glorious Revolution of 1688 is presented as the story of 'good' Parliament and King William and the forces of liberty vanquishing 'bad' King James II and monarchy and other such nasty things.

This isn't to say that Macaulay and other identified Whig historians aren't valuable or useful, rather you should always keep in mind their approach and biases when using them.

The short answer to your second question is yes, of course. It's all very well and good to understand historical events and eras on their own terms but they can't be applied by our present leadership or voters without establishing some context or preferences.

Two problems. The first is that the intellectual climate is very much against narratives that lionize European culture, history, and peoples at the expense of all the others that were conquered by them since the Age of Exploration. That's not really a legitimate complaint, but it's still very real—as shown by the guy above who put sneer quotes around the word "improved" when absolutely and unquestionably humanity lives better off now. Similarly, there absolutely and unquestionably have been "winners" of historical encounters. But he feels uncomfortable saying so or allowing others to say so, because of the historically recent consequences of that approach to our past.

The second is that many of the first few rounds of such narratives were very self-serving and (at root) untrue: Europe did not conquer the rest of the world because of the superiority of their G-d (Iberians), or the superiority of their understanding of G-d (Protestants), or the superiority of their race or culture (19th c.), but because they were able to build superior weapons and then used them.

"Whiggish" is a term of derision because of the second group. Butterfield was a Brit and used a British political term to complain about those on the right who looked at history as a process towards expanding liberty. You're right that such histories have value or can even be superior (teaching that Luther was a fighter for religious freedom is far more accurate and helpful than banging on about his bigotry towards Jews or anachronistically applying modern left-wing values to call him a "conservative" or even "totalitarian") but careful historians who write such histories wouldn't use a 100-year-old British political term to describe themselves, so "Whig" in and of itself will remain a term of opprobrium, albeit one you might use to find authors you agree with.

edit: Here. Found a copy of Butterfield's essay so you can read through it yourself. Makes excellent points, although one feels if he saw the extreme of moral relativism his approach has led to, he might feel a bit like Luther looking at 1930s America.