The story
Coined by British author J. K. Rowling in her 1997 book Harry Potter and the Philosopher's Stone. In Quidditch Through the Ages, Rowling gives some etymological information, hinting that the word evolved from Queerditch (compound of queer + ditch), with some spelling variation as would be expected in real life Middle English, namely Kwidditch, Kweerditch.
Etymology from Wiktionary, CC BY-SA 4.0.