I thought this would be an easy word to define, but I've found a range of opinions. I've seen it claimed as a Spanish word meaning a small group (usually a dozen) soldiers who do drill formation together (taschenrechner says also just a group of people); and as a French word that means "a small ball", rolled into a ball, and/or "a pack or squad" (the latter from my Larousse). Platoon is apparently a corruption of the word peloton, and Webster 1913 concurs on that one, mentioning that platoon is derived from "pelote: a ball formed of things wound round".
Which is interesting, because peloton is also a type of ornamental glass which was manufactured in Bohemia towards the end of the 19th century. It generally features a striated overlay of glass filaments in different colours from the glass of the main vessel. The overlaid filaments might be lined up to make a striped pattern or laid over the vessel in a random squiggly manner. Much prized by collectors.
Anyway, the only place I hear the word peloton used today is in professional cycling, where it refers to a tightly packed group (or platoon?) of cyclists. The advantage of riding in a peloton is that riders can coast along in each others' draft, leaving the leaders at the front of the pack to do all the really hard work.
In elite pro cycling races like the Tour de France, the peloton can contain as many as 190 riders, making it a big unwieldy mass. On the flat stages, squeezing through the country roads of France, the peloton is the site of much gossipping, banter, jostling, and occasional dangerous crashes that can take down dozens of riders in a domino effect. That's the reason top contendors like Lance Armstrong prefer to ride at the head of the peloton: to avoid dangerous upsets that can shave valuable seconds off their overall time in the best of circumstances, or break their bones and take them out of the race altogether in the worst.
As the Tour wends its way into the mountains, the peloton gets split up into many small groups that stretch out into long lines as the riders battle exhaustion as they drag themselves up the Pyrenees and Alps.
WWWWolf says: 'Finnish "peloton" = "fearless", "pelote" = "deterrent".' WWW and I agree that this is probably a red herring, though an interesting one.