The command key was initially called Apple key and it was used in combination with other key to create a menu command shortcut. The shortcut for menu command was displayed in the Menu bar alongside the menu item.
Reportedly, Steve Jobs didn't like the on-screen overuse of the Apple logo. In typical Jobsian fashion:
"There are too many Apples on the screen! It's ridiculous! We're taking the Apple logo in vain! We've got to stop doing that!"
An alternative logo was hunted for by the famed Apple designed Susan Kare, that according to her was distinctive, attractive and had at least something to do with the concept of a menu command.
You can read a first hand account by Andy Hertzfeld on Folklore.org, How we got the unusual symbol used for the menu command key.