Another story you
may hear is that ham is the result of a Cockney pronunciation of (h)amateur.
But that is unlikely for two reasons. First, the term was in use in
America before there was substantial amateur activity in Britain.
And second, voice transmission wasn't used by amateurs of the era,
so how did a pronunciation get propagated by Morse?
Another story you may hear is that it comes from a landline
telegrapher's insult. Many operators of the day came from a landline
background, and on the landlines a common insult was that someone
was "ham fisted" in his sending. It is possible that commercial
operators used this slang to refer to amateurs and it caught on.
Certainly, the term LID came from landline telegrapher slang. (LID
was a reference to use of a tobacco can lid on the sounder to aid a
poor operator in copying Morse.) This one may be true. It wouldn't
be the first time that a group adopted a term originally meant as an
insult to serve as a slang term for themselves.
But the one I like best goes like this. This era was filled with
pulp magazines catering to the experimenter. (Everyone at the end of
the Victorian age apparently viewed himself as a closet inventor or
tinkerer.) One of these magazines was called Home Amateur Mechanic,
and it featured many simple radio sets a person could build. It is
likely that when asked what kind of radio an operator was using, he
might send back RIG HR ES HAM, meaning that it was one of the
circuits shown in Home Amateur Mechanic magazine.