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Emacs originally was an acronym for Editor MACroS. RMS says he “picked the name Emacs because E was not in use as an abbreviation on ITS at the time.” The first Emacs was a set of macros written in 1976 at MIT by RMS for the editor TECO (Text Editor and COrrector, originally Tape Editor and COrrector) under ITS (the Incompatible Timesharing System) on a PDP-10. RMS had already extended TECO with a “real-time” full-screen mode with reprogrammable keys. Emacs was started by Guy Steele as a project to unify the many divergent TECO command sets and key bindings at MIT, and completed by RMS.
Many people have said that TECO code looks a lot like line noise; you can read more on Wikipedia. Someone has written a TECO implementation in Emacs Lisp (to find it, see Where can I get Emacs Lisp packages that don’t come with Emacs?); it would be an interesting project to run the original TECO Emacs inside of Emacs.
For some not-so-serious alternative reasons for Emacs to have that name, check out the file etc/JOKES (see What are src/config.h, site-lisp/default.el, etc.?).