Daesh

The name Islamic State in Iraq and the Levant (ISIL) translates into Arabic as 'al–dowla al–islaamiyya fii–il–i'raaq wa–ash–shaam'. Obviously this has been transliterated into Roman script; the D in 'Daesh' comes from al–dowla, the A from al–islaamiyya, the E from i'raaq, and the SH from shaam. (For a full explanation, please refer to the Internet article referenced below.)

The name Daesh is seen by those opposed to "the so–called Islamic State" as "a challenge to their legitimacy: a dismissal of their aspirations to define Islamic practice, to be 'a state for all Muslims' and – crucially – as a refusal to acknowledge and address them as such".

This information came from a well–informed, but long–winded, article on a website called The Free Word. Sadly it's no longer available, at least in the place where I found it. I don't know if this website has any connection, but you could try looking for it there. Good luck!