[loramin]

And then of course Wikipedia has a say too:

Originally Posted by https://en.wikipedia.org/wiki/Twinking

Etymology
There are several possible etymologies for the word. It may not have been derived from a single source, instead evolving from multiple convergent usages. Its exact origin is unclear.

The gay-slang usage of "twink" has been suggested as a likely origin.[1] One of the connotations of this usage is "a young/inexperienced person who can outfit himself fashionably because of financial benefits from an older/experienced sugar daddy." This parallels MMORPGs, where in-game money is a strong limiting factor in the virtual economy and gear is usually in the form of clothing and jewelry.

The word "twink" appeared in the Ultima Online: Renaissance playguide in the glossary of terms (copyrighted in 2000). It was asserted to have a meaning similar to its current one, but also included powerlevelling.

On the MUD Sojourn, which several creators of EverQuest played, "twink" was alternately used to refer to powerleveling and metagaming. As MUDs date to 1978, this use of the term may possibly predate later uses.

The term twink and twinking predated MMOs and was prevalent in many MUDs. The term came from flags on much of the high end gear that cause gear to be displayed as (twinkling) <gear name>. It was not an alternate name for powerleveling, but could be used as a method of powerleveling.