At the risk of repeating the answer given in a thread above which I havent't read, the term Bluegrass came from Bill Monroe's Blue Grass Boys. Monroe came from Kentucky which is nicnamed "the Blue Grass State." The area of Kentucky around Lexington and Frankfort is known as the bluegrass region, as separate and distinct geologically from the Appalachian area.
And incidentally, there is a sort of lawn grass grown in certain areas of the USA known as bluegrass. It isn't blue at all. I don't for the life of me know why this sort of grass got that name.
Well that's my little bit.
Jim