This symbol was adopted by American telephone company, Bell in the early 1960s, after two researchers, Link Rice and Jack Soderberg, experimented with the development of a method of multiple frequency tone dialling. They soon discovered that by using the available tone combinations more than the required ten digits (0 to 9) could be sent and that to complete an aesthetically pleasing digital keyboard two extra keys could be included.
Following consultation with computer users nation wide, one key was quickly given the asterisk symbol, and after much discussion the second additional symbol was decided upon. The "#" symbol, similar to a musical notation sharp, was chosen.
A Bell Labs boffin, Don MacPherson, given the task of explaining this new key and its use, used the word "octothorpe" to describe this symbol in telephone useage. This was derived from the eight (octo) prongs and the surname of an Olympic medalist (Jim Thorpe).
Jim Thorpe was an outstanding American athlete who won medals in the Stockholm Olympics of 1912. He was stripped of his medals a year later and had return the gongs to Sweeden as he was a "professional" by virtue of his being paid 25 dollars a week during 1910 when playing for a minor baseball team. The prevailing Olympic rules said that only amateurs could compete and win medals.
Following a nagging campaign, in which Jim MacPherson was a part, the medals were restored in 1982, 29 years after the athlete's death.
"Octothorpe" has been used in techical circles since MacPherson coined it in the mid 1960s.