Though the definite origins of the word "Palestine" have been debated for years and are still not known for sure, the name is believed to be derived from the Egyptian and Hebrew word peleshet. Roughly translated to mean "rolling" or "migratory," the term was used to describe the inhabitants of the land to the northeast of Egypt - the Philistines. The Philistines were an Aegean people - more closely related to the Greeks and with no connection ethnically, linguisticly or historically with Arabia - who conquered in the 12th Century BCE the Mediterranean coastal plain that is now Israel and Gaza.
A derivitave of the name "Palestine" first appears in Greek literature in the 5th Century BCE when the historian Herodotus called the area "Palaistinē" (Greek - Παλαιστίνη). In the 2nd century CE, the Romans crushed the revolt of Shimon Bar Kokhba (132 CE), during which Jerusalem and Judea were regained and the area of Judea was renamed Palaestina in an attempt to minimize Jewish identification with the land of Israel.
Under the Ottoman Empire (1517-1917), the term Palestine was used as a general term to describe the land south of Syria; it was not an official designation. In fact, many Ottomans and Arabs who lived in Palestine during this time period referred to the area as "Southern Syria" and not as "Palestine."
Leading up to Israel's independence in 1948, it was common for the international press to label Jews, not Arabs, living in the mandate as Palestinians. It was not until years after Israeli independence that the Arabs living in the West Bank and Gaza Strip were called Palestinians.