About 10 years ago, I was part of the large team in Redmond working on the set of projects which became ".net". This was during the time the decisions were being made about what to name this work. I can tell you from first-hand experience that ".net" is not an acroynm.

Instead, the James Kovacs blog post that Jim W posted is accurate: ".net" was one of many names that the teams cycled through (and thankfully rejected) before settling on ".net". The name was chosen because it:

mirrored the domain suffix of (at the time) every ISP, so was intended to remind users that "web-enabling your software" was the core scenario being targetted by this work

was more approachable to business types and CIOs than geekier names like "Universal Runtime" or "COM+ 2.0"

had practical benefits like: being short, easy to spell, globalized well, could leverage already-owned domain names for every Microsoft product, etc.

actually passed legal/trademark review (surprisingly difficult!)

So it was intended to mean something, but more so by connotation rather than directly abbreviating or describing something. In other words, the name was only partly marketing nonsense! ;-)

More trivia

I don't remember the exact positioning (it's been 10 years!), but I believe that the name ".net" was supposed cover three basic things:

".net Framework" - a new framework for writing web-enabled apps

".net web services" - a way of accessing Microsoft (and others') software over the web programmatically using open standards and protocols (anyone remember "Hailstorm"?)

".net enterprise servers" - a set of products which made bulding web-enabled applications easier.

In practice, only the first meaning stuck with users. The others morphed into other names (e.g. "Windows Server System") or were genericized by the public (e.g. "web services", SOA, etc.). Anyway, that's why you don't see Microsoft products named "<product name here>.NET Server" any more-- Microsoft wisely decided to limit the ".net" name to the things that developers actually thought of as ".net"!

BTW, in addition to being short and easy to spell and say, ".net" as a name also helped with the web services strategy which Microsoft was persuing at the time, which revolved around (and still does) offering software which was also available in the cloud. The idea was that we'd have, for example, Office.com for a hosted UI version, and Office.net for the APIs. The name also was convenient since Microsoft already owned the .net domain-name variants for every microsoft product.