What is the etymology of the term loop device
Description: Wikipedia: loop device
I believe it is from loopback,
It is a loop device because it is backed by a file on a different file-system.
See also Loopback Device,
I have no proof of this but I always took the term "loop device" to be drawn from the musical reference "loop".
Also the Wikipedia page on music loops.
Anything that can be fed back onto itself in some manner is a "loop", and is often the case with "loop devices", one is often mounting the contents of a file that's present on the current filesystem blown out as a pseudo directory structure within that same filesystem.