There is a decent write-up above about the breakdown of the word catholic. However I was curious about how the word first came into usage as a name for the early Christian church, after hearing a joke from Eddie Izzard. He was talking about the history of religion, and he said, "And then for about 1500 years we had the Catholic church... you know those who follow the teachings of cathol."

Anyway, so after poking around a bit, I found some information on how the word came into usage for the church. According to the Catholic Diocese of Lake Charles, Louisiana, the word was first used by Romans describing the followers of Jesus, because they were "universal" or found though out the entire empire. In addition:

Among members, of course, the word had a much more significant and broader meaning than just geographical consideration. It was understood also to describe the very nature of the Church, in that it was universally for everyone.
Source: Catholic Diocese of Lake Charles, Louisiana
http://lcdiocese.org/resources/viewdifference.asp?differenceID=19