The
name is supposed to come from a cross between "
marionette" and "
puppet." However, in a 1982 interview,
Jim Henson said, "I think we did the term Muppets before we got the show
Sam and
Friends - a few months after I started working. It was really just a term we made up. For a long time I would tell
people it was a combination of marionettes and puppets but, basically, it was really just a word that we coined. We
have done very few things connected with marionettes."
The most famous places that Jim Henson's Muppets appeared were on Sesame Street, The Muppet Show and Fraggle Rock, but they were first used on "Sam and Friends," which ran for eight years starting in 1954, and some commercials made around the same time. Kermit the frog, for example, was a puppet made out of the bluish-green material from an old coat belonging to Henson's mother -- at first, he was not even identified as a frog.
Muppets also appeared on the Ed Sullivan Show in the 1960s, on Saturday Night Live in the 1970s, and many other TV shows before they really became well-known as Muppets rather than just some kind of puppet.
Source:
http://www.muppetcentral.com/articles/interviews/jim2.shtml