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The "i" in the iMac originally stood for "Internet" and then I assume that Apple decided to use the 'i' theme in all it's products. So I guess it's "internet pod" and "internet tunes"
I'm not sure it really stands for anything anymore. CheeseBurgerman is right about the iMac. I think at this point it has simply become a marketing gimmick..
It's now working as some sort of brand recognition for Apple. How much publicity would be generated for our little white friend if it was simply called the 'Pod'; my guessing is not as much.
I always thought it stemmed from Steve Jobs's return to Apple. His first real title when he returned was "Interim CEO"... which was often written in literature at the time as "iCEO". Shortly after, the iMac came out... and then the rest was history.
I checked an acronym finder and it said iPod standed for "internet Pod"
The thing is though, is that iPod was released after the iMac. The iMac stood for internet mac (As it was all in one, the main advertisement of the product was that you could take it out of the box, plug it in to the internet and go). The iPod was made after iTunes, iMovie and iDVD. The 'i' is just a gimmick, it doesn't stand for anything.
Internet Pod, Im angry that I cant get RSS feeds on my iPod, because there is no internet.
I always thought Pod stands for Personal Oudio Device.
Everyone knows that the "i" stands for "itchy". What else could it stand for. ItchyPod. IthcyMac. ItchyBook.
AdITCHYos, amITCHYgos.
the "i" could be for incredible. 
my sister always thought it was because "i" rhymns with "my".
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so a friend of mine asked me the other day what did iPod stand for and i didnt know what to tell her. so i was wondering what does iPod stand for and the i that is in iMac iPod iTunes and so on