I chose mine after I was unable to bring my old ICQ nickname over to Xbox Live when the first Xbox came out, due to the limit on the amount of characters.
I was going on a holiday in Spain (no, I didn't leave my wings behind me or drank my worries down a drain* ) and I heard two old guys greeting each other from a distance: "¡Hola, Muchacho!" and that kinda stuck with me.
It basically means 'boy' or 'young lad'.
Unfortunately, somebody took it from me with the new Xbox 360 launch so I'm "RealMuchachoNL" there
* yes, that was a Counting Crows reference.