Wordorigins.org

Everyone “knows” that Pennsylvania is named after the founder of the colony, the Quaker William Penn. But they would be wrong, at least by one generation. Pennsylvania is actually named after Penn’s father, Admiral William Penn. King Charles II granted the colonial charter to the son William Penn in 1681 in settlement of a large debt he had owed the admiral and he insisted that the colony be named after the admiral. The name is a combination of Penn + sylvania, from the Latin sylvanus, or woods. So the colony and later state is literally Penn’s woods.

(Sources: Illustrated Dictionary of Place Names; Webster’s Third New International Dictionary)