Can believe the obvious reason isnt already answered?
Microsoft lost their case vs SUN who had developed JAVA. Microsoft wanted to push JAVA further forward and into Microsofts Windows environment, to allow it to run faster and utilize Windows better.
SUN saw the "badness" in another Microsoft only and wanted JAVA to stay true crossplatform. So after Microsoft lost the case, they removed the JAVA-VM from their Internet Explorer and now consumers had to download the client manually if they really wanted JAVA so badly.
In the background Microsoft had gained SO much insights in how JAVA was build and combined with their ideas, they "invented" .NET technology based on Microsoft platform. They also made it OpenSource, so that people could produce "legal copies" on other platforms if they wanted (MONO).
So... why is .NET called .NET ? well, the name "JAVA" was already occupied and the new name had to be very different because of lost case/court trials, eventhough the technologies behaves very similar.
(oooh, now I will probarbly get my head pulled of and placed on a stick somewhere by angry evangelists, so before that, just for your information people, I develop C#.NET solutions myself. Not JAVA, and every example I've seen on JAVA looks more or less the same. The only changes are some of the syntax + the API names)
EDIT
FFS... seems like some Microsoft Evangelists couldnt handle the fact/truth about their beloved religion, so I going to post a few links explaining my statements.
Again - I was NOT trying to start a flamewar, as I like .NET - I just call it what it started as: A TOTAL RIP-OFF FROM JAVA (there I said it, flame me!)
As Microsoft couldnt push JAVA in their own prefered direction, they decided to "invent" .NET and decided NOT to include Java-VM any longer. Harming SUN's distribution and forcing customers to choose .NET or manually downloaded JAVA
Microsoft lost to SUN
http://itmanagement.earthweb.com/entdev/article.php/1561231/Sun-Wins-Injunction-Against-Microsoft-in-Java-Case.htm
Compare JAVA vs C# which could be developed without the flaws learned from the mother language
http://en.wikipedia.org/wiki/Comparison_of_Java_and_C_Sharp
Again, I love .NET and C# for how easy things has gone, what I cant stand is the fact that people try to "hide" the truth of its origins. Give it some credits, thats all - and lets go build some awesome software shall we?
Btw. Android OS (from Google) is build on JAVA as its OPEN... so perhaps we should consider having a second look at that "oooh sooo old and mean JAVA" ???
I dont have a language/code religion... I choose the best tool for the task.