Erlang, created by Bjarne Däcker at Ericsson, was named after the erlang, a dimensionless unit of telecommunications traffic measurement. The unit was named in honour of Agner Krarup Erlang, a Danish mathematician who invented fields of traffic engineering.
However, when asked if erlang was also intended to be a contraction of ERicsson and LANGuage, Däcker said:
Yes, indeed, we were very pleased with ourselves
for having thought of such a good pun. Lately,
however, we downplay the Ericsson aspect.
Sources: How Erlang got its name | Email to Bjarne Däcker