iPod is a word proposed by Vinnie Chieco, who was called by Apple to think a plan to introduce the new media player to the public. After Chieco saw a prototype, he thought of the movie 2001: A Space Odyssey and the phrase "Open the pod bay door, Hal!", which refers to the white EVA Pods of the Discovery One spaceship.
After Vinnie mentioned the word iPod as a possible name, everyone liked it and was approved immediately.
That's the story behind the name.