The title originates from the science fiction novella Blade Runner (a movie) by William S. Burroughs. According to Wikipedia:
The term "blade runner" referred to a smuggler of medical supplies, e.g. scalpels.
The history behind choosing the name is detailed in Future Noir: The Making of Blade Runner by Paul M. Sammon:
Fancher found a cinema treatment by William S. Burroughs for Alan E. Nourse's novel The Bladerunner (1974), entitled Blade Runner (a movie). Scott liked the name, so Deeley obtained the rights to the titles. Eventually he hired David Peoples to rewrite the script and Fancher left the job over the issue on December 21, 1980, although he later returned to contribute additional rewrites.
Fancher recalls that in July 1980, "Ridley said we couldn't keep referring to Deckard as a detective, because that was the lazy way out. Couldn't we come up with a different name for his line of work?"
Ransacking his mind and home library, Fancher discovered a slim, little-known book by celebrated "beat" author William Burroughs. It was title Blade Runner: (a movie). After then bringing these words back to Scott, the director responded favorably to them, reasoning that a "Blade Runner unit" was a catchy term to describe the departmentally sanctioned police assassins outlined in Fancher's script.
Ridley and I also thought that Blade Runner would make a hell of a new title for a screenplay," Fancher continues. "So Scott asked Michael Deeley to approach William Burroughs' representatives with the idea of buying the use of his title. Deeley did so, and Burroughs was really cooperative. That's when the film started being called Blade Runner.
This is extended in the back matter in an interview with Ridley Scott:
This is a basic question, but how did you latch onto the actual title of this film? I do know you bought the rights to the words 'Blade Runner' from Burroughs and Norton, but who initially discovered those words? And why did you choose them?
That's a good question, but a long answer.
We spent months, in early 1980, when I first came out here to Los Angeles--Hampton Fancher and I, and sometimes Michael Deeley--spending every day slogging through the Dangerous Days script. Now, Hampton had composed a clever screenplay about a man who falls in love with his quarry. But for budgetary reasons, he'd kept it very internal. So I said to him, "You know, Hampton, as soon as this Deckard character walks out a door, whatever he looks at must endorse the fact that his world has reached the point where it can create replicants. Otherwise this picture will not fly. It'll become an intellectual sci-fi."
This was the point where we began to create the architecture of the film. Not long after, we'd arrived at a screenplay which I think integrated Hampton's original storyline, characterizations, and dialogue with what we'd managed tologically decide what Blade Runner's outise world had to be like.
But then I finally said to Hampton, "You know, we can't keep calling Deckard a goddamn detective." And he said, "Why not?" I replied, "Because we're telling a story in 2019, for Christ's sake. The word 'detective' will probably still be around then, but this job Deckard does, killing androids, that requires something new. We've got to come up with a bloody name for his profession."
That was on a Friday. Hampton slunk in the next Monday. We had our meeting, and he said, "By the way, I've come up with a name." And I asked, "What is it?" Instead of telling me, he wrote it down. And as he handed the slip of paper Hampton said, "It's better that your read it than hear it."
Of course, it read "Blade Runner." I said, "That's great! It's wonderful! But the more I enthused about it, the more Hampton looked guiltier and guiltier. So I asked, "Where'd it come from? Is it yours? [laughs] Finally, he said, "Welll...no, not really. Actually, it's William Burroughs'. From a slim book he wrote in 1979 called Blade Runner: A Movie." And I said, "Well, we gotta buy it, we gotta buy it!"
Burroughs, who turned out to be a fan of Philip Dick's, then said "Sure!" when we approached him, and gave it to us for a nominal fee. So that's how the title was acquired. I thought the words "Blade Runner" very well-suited our needs. It was a nice, threatening name that neatly described a violent action.
It also neatly describes Deckard's character, which runs on the knife's edge between humanity and inhumanity.
Yes, it does. What's more, there are a lot of delivery services in Hollywood that now have exactly the same style of typeface. [laughs]
The above quotes were found using the "Search Inside!" feature on the Amazon book page (page 53).