Having been in the industry for so long and always curious about the history of computing, some how I missed this explanation and indeed had never thought to ask. Thanks to Richard Gingras on pointing this out over on Google+.
"Grace Hopper was a pioneer in computing and worked at the Harvard Computation Laboratory on the early Mark computers. She loved to recount the origins of the term. In 1946, there was a problem with the Mark II that operators traced to a moth trapped in a relay, coining the term bug. This bug was carefully removed and taped to the log book. Thus, the origin of errors or glitch's in a program being called a bug"
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