When Apple re-branded the Mac as "iMac" in the late 90s it was to focus on the home user market and they coined their whole "iLife" experience. At that stage Microsoft had all but expelled Apple from the business market so they needed a whole new approach. Windows biggest downfall was that it always required users to have some sort of IT degree to just make their products run properly, so it was clear that the home user market was really open to Apple's whole user-friendly, one button, true plug-and-play OS.
So it is meant to be "i" as in "me" - to personalise all their consumer products. It could arguably also stand for "interconnected" as this was also a key element of their product strategy but I think it is simply to make us all feel special when we purchase one of their products.


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