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California originally referred to the entire region composed of the Mexican peninsula now known as Baja California and land in the current U.S. state of California.

The name is thought to have derived from the mythical paradise of Calafia portrayed in Amadís de Gaula, a 16th century Spanish romance by Garci Rodríguez de Montalvo, which in the book was a difficult to reach land with gold in plenty, free-loving Amazons living in caves, and strange beasts.

Some suggest that the word California may come from the early Spanish explorers who entered California via the hot southern regions and referred to California as being "hot as an oven" or a "lime oven" ("cali" - hot, "fornus"/ "forno" - oven + ending "ia" for a place; or with "cal" - lime, which is a usual form of Spanish to form new words out of Latin roots with Spanish new words). It may be derived from caliente fornalia, Spanish for hot furnace, or it may come from calida fornax, Latin for hot climate. According to one esteemed historical society it came from Califa, legendary figure in the indigenous settlement.

Source: http://en.wikipedia.org/