From multician.org: http://multicians.org/mgd.html:

" daemon

A beneficent spirit. A process, not associated with a human operator, that runs all the time and waits for requests to do something for a user. This term is respectable English; the application to computer processes is usually credited to M. J. Bailey, working on the design of CTSS in the early 60s.

[JHS] "I'm working from memory here, but I think this is the story. Although the word 'process' wasn't in the vocabulary yet, we had just figured out that what one would now call 'system processes' were a solution to several problems, and we were looking for a good label for them. A British gentleman named Michael (Mick) Bailey, working on the CTSS programming staff at MIT, suggested the word 'daemon' and quoted the OED in support of both the meaning and spelling. Bailey's etymology was so impeccable that questions as to whether the spelling should be simplified to 'demon' went on for only about 30 seconds. On both CTSS and Multics, the documentation and the process names use the spelling 'daemon.' I suspect that the date on the memo that first used the term would be in 1962 or 1963."(note to Kirk McKusick, 24 Aug 1988)"

-- Charles