According to the Oxford English Dictionary, the word 'boycott' was first used in 1880 in The Times ('They also do not feel warranted in regarding the threat of ‘Boycott’ as one which comes within the Act.') and in 1885 in the Pall Mall Gazette ('Those who have continued to hire Chinese labour and patronize the same since the Boycott.'). Although the word was first used in the 19th century, I am sure that boycotts have been taking place for centuries (anyone want to find out when the oldest recorded boycott took place?). The word comes from the name of Captain Charles Boycott.
"Many British absentee landowners in late 19th century Ireland took advantage of famine conditions in Ireland to evict tenants from their property and to lower wages for field work. One of the worst offenders was Captain Charles Boycott (1832-1897), estate manager of the Irish lands of the British Third Earl of Erne. In 1880, Boycott evicted undesirable tenants from the Earl's estates and paid laborers only half the day wage for field work. An American journalist in Ireland and an Irish priest came up with a fitting word to describe the Irish Land League's tactic of encouraging the peasantry to stop working and producing for oppressive landlords, coining the term "boycotting." Irish peasants "boycotted" the estates of absentee Earl of Erne, forcing Charles Boycott to harvest the crops. The boycott was extended further: no merchant would service the Boycott family, and their servants disappeared. This collective social and economic ostracism forced Boycott to stop his abusive tactics.