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Nihon and Nippon are the two names used in Japanese to refer to Japan. The latter is usually prefered in formal situations, probably because it can be pronounced with more forcefulness. The kanji characters used are "nichi" meaning sun, and "hon" meaning origin, The combination is usually translated as "the land of the rising sun". This phrase can be traced back to the 7th-century ruler Prince Shotoku, who used it in a letter to China.
The origin of the word "Japan" used in western languages is less clear. One theory holds that it came from the Portuguese "jipang", which in turn was an attempt to pronounce "Jihpenkuo", the name for Japan used in northern China. Another idea is that Dutch traders pronounced "Yatpun", the name used in southern China, as "Japan" (the 'j' being pronounced like a 'y').
For more info: www.wikipedia.org