History lesson: Stack Overflow was the first site to be launched. It was a resounding success and shortly Server Fault, Meta Stack Overflow & Super User were launched later.
Based on success of these sites, Stack Overflow begins to offer Stack Exchange 1.0, as a white-labelled solution. It didn't go too well, and SE1.0 was canned. In the interim, Area 51 is launched, allowing for new sites to be proposed by the community.
The initial Stack Exchange sites start to grow. Stack Exchange gets spun into Stack Exchange 2.0, a network-wide aggregator of all Stack Exchange sites.
Stack Exchange 2.0 sites initially were to get individual domains. Web Applications goes live as Nothing To Install. Marco Arment mentions us. Jeff & co do a volte-face, say Domains are Bad, topic.stackexchange.com goooooood.
Since he was BDFL then, the naming stuck. Despite overwhelming wishes against this from the community
yes, I'm still a little bitter about that.