Gawd you guys are good!

"Etymologically , a pencil is a 'little penis'. It originally denoted a 'paintbrush' - the current sense 'writing implement filled with a graphite rod' did not emerge until the 17th century - and came via Old French pincel from Vulgar Latin *penicellum, an alteration of Latin penicillum 'paintbrush'.

This was a diminutive form of peniculus 'brush', which was in turn a diminutive of penis. Penis originally meant 'tail' (whence the metaphor of the 'brush'), and only by extension was it used for 'male sex organ' (in which sense English adopted it as penis."

-Arcade Dictionary of Word Origins, John Ayto, 1990