chad /chad/ /n./ 1. The perforated edge strips on printer paper, after they have been separated from the printed portion. Also called selvage and perf. 2. obs. The confetti-like paper bits punched out of cards or paper tape; this has also been called `chaff', `computer confetti', and `keypunch droppings'. This use may now be mainstream; it has been reported seen in directions (1993) for a card-based voting machine in California.
Historical note: One correspondent believes the term `chad' comes from the Chadless keypunch (named for its inventor), which cut little u-shaped tabs in the card to make a hole when the tab folded back, rather than punching out a circle/rectangle. It was clear that if the Chadless keypunch didn't make them, then the stuff that other keypunches made had to be `chad'. There is a legend that the word was originally acronymic, standing for "Card Hole Aggregate Debris", but this has all the earmarks of a bogus folk etymology.

The Online Hacker Jargon File, version 4.0.0, 24 JUL 1996