I think it once stood for ShockWave Component.
Adobe Flex SDK Team
As a sidenote, I recall something that the abbreviation for SWF changed from ShockWaveFlash to Small Web Format, along the way. Not totally sure, but that was my immediate reaction when I read your post.
Then I guess SWC is now Small Web Component. Everybody just refers to SWF and SWC so it doesn't really matter what they mean.
Gordon Smith, Adobe
Hehe, you may be right. But for me (as a teacher) this is the questions we get all the time :-) Let's settle with "small web" AND "Shockwave".
If you are the type that tend to trust Wikipedia, SWF is now "Small Web Format" (http://en.wikipedia.org/wiki/Swf) to clarify it's meaning.
One can say that a swc is practical during development, but have nothing to do with the small-web thing. So it looks like you were right in the first place, but with a underlying risc that it will change if the brand police somes around the swc-house :-)