The story
From Clippit + -y (suffix forming familiar names, pet names, nicknames and terms of endearment).
Etymology from Wiktionary, CC BY-SA 4.0.
clippy
Today it means: Clippit, an interactive virtual assistant, depicted as a paper clip with eyes and eyebrows, that appeared chiefly in Microsoft Office software in the late 1990s and early 2000s. Full definition →