For an indepth history of the ukulele please visit 'Ukulele Guild of Hawaii at: http://www.ukuleleguild.org/history.php

Short version acording to Brudda Bu's Ukulele Heaven: http://www.geocities.com/~ukulele/index.html

When the ship the Ravenscrag arrived in Honolulu on the afternoon of August 23, 1879, it was carrying 419 Portuguese immigrants from the island of Madeira to work in the sugar cane fields of Hawaii. It had been a long and hard journey of over 4 months and some 15,000 miles. In celebration of their arrival, Joao Fernandes borrowed his friend's braguinha, jumped off the ship, and started playing folks songs from his native land on the wharf. The Hawaiians who came down to the dock were very impressed at the speed of this musicians' fingers as they danced across the fingerboard and they called the instrument "ukulele", which translates into English as "jumping flea". (Again, read the rest of the story at: http://www.ukuleleguild.org/history.php )

On a side note:

UKULELE

Mainland: yoo-kuh-ley-lee

Hawaiian: oo-koo-ley-ley

While the mainstream American English pronunciation of "ukulele" is yoo-kuh-ley-lee some English speakers prefer to accurately follow the original Hawaiian pronunciation: oo-koo-ley-ley. Though the American English pronunciation is more common overall, the Hawaiian pronunciation is favored within Hawaii and by individuals interested in Hawaiian culture.

Below is an advertisement from around 1907 - ten years before the ukulele rage would hit the mainland .