The story
Named after the terry towelling fabric from which these flat nappies were most commonly made.
Etymology from Wiktionary, CC BY-SA 4.0.
terry nappy
Today it means: A cloth nappy folded from a large piece of square or rectangular absorbent fabric which is held in place by a nappy pin or other fastener, especially one made from terry (coarse cotton); a flat nappy. Full definition →