The name is a deliberate misspelling of the name of a bland and fairly inoffensive food, milk toast. Milk toast is light and easy to digest, therefore appropriate food for someone with a weak or "nervous" stomach, or an invalid.
From this character, the term "milquetoast" has come into general usage to mean "weak and ineffectual." When the term is used to describe a person, it typically indicates someone of an unusually meek or submissive nature, who may appear overly sensitive, timid, indecisive, or cowardly.