According to this interview, it was a childhood rubbish nickname, which he didn't like.
It was not a nickname I wanted as a child. My family called me Dico, my mates in the street called me Edson. When they started to call me Pelé I didn’t want them to. I thought it was a rubbish name. Now you even see it in the Bible. In Hebrew Pele means miracle. A theologian discovered this, and then told us. Which means, its there in the Bible. Sometimes I ask Jesus, “Man, Explain to me.” I know I will die like everyone. We’re just waiting for the hour. These things,this lack of explanations, make us curious, often I don’t have the answer. Only God knows.
[Link updated on August 22, 2016 by shuehorn]