During the development of the original prototype, one of the developers was suffering from an unfortunate fungal infection that had spread to much of their foot. Sitting there with their sock off, the name for their new software became apparent...

It's from the Swedish gren fot, meaning "branch base". You might then wonder what "branch base" refers to! In fact Greenfoot could be considered a "branch" from the original "base", which is BlueJ , and because it starts with a colour, we changed the "gren" to "green"; "fot" also means "foot" so that was an obvious additional change.

It's actually based on an old myth from the Australian aborigines where a character called Gandpa Greenfoot comes down from a black rain cloud because Mugga Mugga (the main character) had buried his hands in mud, which then dried out and hardened, trapping him (and putting him in mortal danger because, of course, the kangaroos get very agressive after sunset). It's a long story, but the main point is that Greenfoot brings wisdom to his people, and it's named after him.

I think @nccb is about right - that's what I heard as well, except I didn't know about a fungal infection - I heard that he just had stepped into something and it was nasty and green. and smelled bad. His name was Poul.