I suspect it's something to do with the fact that back in the Olden Days of computing, a terminal was connected to a mainframe computer system, and thus a user would be sat at the terminal end of the connection. Unfortunately I can't find anything to back up my suspicion!
Can anyone confirm/refute this?
In the olden days of mainframes, from the mid 1970's to the mid 1980's, most people used real text-terminals to communicate with large computers. These real text-terminals were neither computers nor emulated text-terminals. They consisted only of a screen, keyboard, and only enough memory to store a screenfull or so of text (a few kilobytes). Users typed in programs, ran programs, wrote documents, issued printing commands, etc. A cable connected the terminal to the computer (often indirectly). It was called a terminal since it was located at the terminal end of this cable.
Etymonline's comments simply say:
terminal (n.) "end point of a railway line," 1888, from terminal (adj.); sense of "device for communicating with a computer" is first recorded 1954.
Wikipedia notes that there is an electronics term for "terminal":
A terminal is the point at which a conductor from an electrical component, device or network comes to an end and provides a point of connection to external circuits. A terminal may simply be the end of a wire or it may be fitted with a connector or fastener. In network analysis, terminal means a point at which connections can be made to a network in theory and does not necessarily refer to any real physical object. In this context, especially in older documents, it is sometimes called a "pole".
Thus, with regards to networking, the use of "terminal" in railway connections were probably applied to computer networks. The "terminal" would be the connection to the network.
Furthermore, Wikipedia's entry on telecommunication terminals describe them as such:
In the context of telecommunications, a terminal is a device which ends a telecommunications link and is the point at which a signal enters and/or leaves a network.
More evidence for this connection is under Etymonline's entry for "network":
network (n.) "net-like arrangement of threads, wires, etc.," 1550s, from net (n.) + work (n.). Extended sense of "any complex, interlocking system" is from 1839 (originally in reference to transport by rivers, canals, and railways). Meaning "broadcasting system of multiple transmitters" is from 1914; sense of "interconnected group of people" is from 1947.
The term "terminal" was introduced not long after the term "network": 1888 and 1839 respectively.
According to the Chronology of Computing at Columbia History (emphasis in original):
1954:
Invention of the cursor: As part of his work on the first "personal computer" (the IBM 610), Watson Lab's John Lentz designs a small video terminal – keyboard and tiny screen – for control and data entry. in which the “current position” was indicated visually by what came to be known as a cursor. Lentz applied for a patent on this concept; the patent was finally granted in the early 1970s. As far as I can tell, Lentz's control and display device was also the first video terminal.
The History of Visual Magic in Computers includes a photograph of this device dated “circa 1948” and notes that it wasn't officially announced by IBM until 1957. Given the Columbia history dated 1954, it appears that the Online Etymology Dictionary entry is referring to this device. Thus, the term existed even before the first terminal was commercially released.
Note that Lentz's device is not like a teletype or workstation attached to a mainframe network, but rather a simple display and input device attached to a personal computer. Therefore, this appears to be the sense of terminal widely used in electronics to describe a connection point, like the terminals of a battery:
3. Electricity a. A position in a circuit or device at which a connection is normally established or broken. b. A passive conductor at such a position used to facilitate the connection.
This sense of terminal meaning “electrical connection point” predates video terminals by several decades; Google books attests uses of “battery terminal” from the 19th Century. It's related to other senses of the word meaning “endpoint,” but it's likely that the derivation of computer terminal is “electrical connection” rather than literally “the end of a cable.”
The OED's sense B.2.d. for terminal is:
A device for feeding data into a computer or receiving its output; esp. one that can be used by a person as a means of two-way communication with a computer.
Their first two quotation are:
1954 IRE Trans. Electronic Computers 3 2/1 Since the two machines employ the same digital language, this attachment can easily be made through their regular input-output terminals.
1958 Oxf. Mag. 29 May 470/1 The ‘terminal’ equipment, consisting of punched paper tape and a teleprinter, is relatively slow.
Sense B.2. is:
A terminal part or structure, i.e. one situated at or forming the end, or an end, of something
