Ralph Carlsen explains the origin of the word octothorpe (or octothorp) in his note to the Telecom Digest journal. The word was invented in the 1960s by Bell Labs supervisor Don MacPherson. MacPherson was giving lectures about the new Bell Labs PBX systems and felt he needed to come up with a word to describe the "#" symbol. He thought that because there are eight points in the symbol, the word "OCTO" should be included in the name. The source of the "THORPE" part is not fully confirmed, but Carlsen tells that MacPherson was participating in a group that was trying to get the athlete Jim Thorpe's Olympic medals returned from Sweden. Another explanation of the "THORPE" part is that the sign was thought to look like a group of eight fields surrounding a village. "Thorpe" is the Old Norse word for a hamlet, village or farm, common in British place names. Due to the lack of exact information, though, many dictionaries tell that the word is of unknown origin.
Sources of information:
Telecom Digest archives at http://hyperarchive.lcs.mit.edu/telecom-archives/
World Wide Words, http://www.worldwidewords.org/