I've only minimally read about this that I can remember, but supposedly there are two definitions depending on who you choose to believe (maybe they're even both valid, I don't really know)
1) it's an initialism for "3-Dimensional Objects
2) It fits nicely into a marketing slogan: "Audio, Video, 3DO". I remember seeing Trip Hawkins quoted as saying that 3DO would basically be the next big entertainment/culture revolution like film/television was, which would explain it a bit better.
