MIT "hack" comes from the pranks and unauthorized adventuring that many undergraduates came to enjoy on campus. (eg. http://hacks.mit.edu/Hacks/misc/best_of.html)

Hack was then used by MIT's TMRC of which many members became involved with/helped build the AI-lab. The first third of Hackers (http://www.amazon.com/Hackers-Computer-Revolution-Anniversar...) gives a good perspective on the evolution.