Pico was named "Pico" because the creator, Tom Fulp, originally wanted to name him "Pogo," but the domain name Pogo.com was already taken. He was then inspired to use the name "Pico" after a character from the 1991 RPG Cosmic Fantasy 2.
Originally, Pico was almost named "Pogo," which would have been simpler. However, the existing website Pogo.com forced a change. Fulp then looked to Cosmic Fantasy 2 for inspiration and settled on Pico.
In summary, the name selection was a compromise between the original idea and avoiding trademark conflicts, influenced by a character from a classic RPG.