The story
Transliteration of Arabic دَاعِش (dāʕiš, literally “D.I.I.S.”) the Arabic language acronym for الدَّوْلَة الْإِسْلَامِيَّة فِي الْعِرَاق وَالشَّام (ad-dawla l-ʔislāmiyya fī l-ʕirāq wa-š-šām, literally “State Islamic of Iraq and the Levant”). The forms Da'esh, Da'ish and Daish refer to the same acronym but are transliterated differently. The Arabic acronym is thought to have been coined in 2013 by a Syrian activist.
Etymology from Wiktionary, CC BY-SA 4.0.