The story
From small talk; according to Alan Kay (one of its creators): The name actually appeared before the first Smalltalk design, which was done in 1971. I had mentioned to someone that the "prose" of then current programming languages was lower than a cocktail party conversation, and that great progress would have been made if we could even get to the level of making "smalltalk". It then occured^([sic]) to me that this word was also a great pun for a language aimed at the world of small children. As for hype: Another motive for "smalltalk" was the practice at the time of naming operating, and other, systems (which hardly did anything) after mighty indo-european gods, such as Thor, Zeus, Odin, etc. I figured that if Smalltalk ever did something neat, then people would be pleasantly surprised.
Etymology from Wiktionary, CC BY-SA 4.0.