The word "Pokemon" is a contraction of two Japanese words, "Poketto" and "Monsut?," or "Pocket Monsters" in English. The combination of two words to make a single name is a popular way for Japanese titles to transition into English, especially when they're long or similar to trademarked names.
According to the book "Pikachu's Global Adventure," Capsule Monsters was the original title before it was changed to CapuMon and then Pocket Monsters. The title was later shortened to a contraction for trademark purposes because there was already a trademark with the title of "Monster in My Pocket." Pokemon is pronounced "poh-kay-mohn" for this reason.