It was because they had high X-pectations of it.

Because it sounds awesome? :-p

pretty much this

Cause of DirectX right?

Because when you see it, you turn Xbox degrees and moonwalk away?

directxbox was what they wanted to name it.

Lol, best answer ever

Because of direct x

Everyone here has been wrong so far...

The Development Team just simply forgot to include the name. During all of the time it was developed, it had a simple "X" in place for the name. The mostly ignorant intern that was supposed to remove the "X" on all of the proposals for the head honchos forgot to. So, the team behind the console didn't want to look stupid at the meeting with the head honchos, so they simply stated that "yeah, the name on the powerpoint is correct, it is the "X" box or Xbox.

I can't believe that you all don't know this!

Some people think (although they are certainly wrong) that it was a counter to a proposed Gamecube name, StarCube.

Star cube.
X Box