How "macro" in computer programming came about

In computing, "macro" was first used with assemblers, which are utilities that perform simple translation of readable mnemonics into machine instructions. Normally a single line in an input to a basic assembler produces a single machine instruction output; the line is commonly referred to as an instruction. Productivity was increased when the use of what were termed macro-instructions were invented. Macro- is of course a standard prefix from the Greek meaning large, and a macroinstruction was a new kind of input line which would generate several machine instructions.

The OED shows a revealing quote from 1959:

The built-in system macro instructions in SCAT presently consist of (1) two macros for generating the‥standard entry and exit from subroutines, (2) a set of debugging macros.

This shows use of both the full form, macro instruction, and the abbreviated form, macro. (Quote is from Greenwald & Kane, "The Share 709 System: Programming and Modification", Journal of the ACM 6:133. SCAT ("Symbolic Coder And Translator") was an early macro-assembler.)

From the Computing Dictionary:

The term "macro" originated in early assemblers, which encouraged the use of macros as a structuring and information-hiding device. During the early 1970s, macro assemblers became ubiquitous, and sometimes quite as powerful and expensive as HLLs, only to fall from favour as improving compiler technology marginalised assembly language programming (see languages of choice). Nowadays the term is most often used in connection with the C preprocessor, Lisp, or one of several special-purpose languages built around a macro-expansion facility (such as TeX or Unix's troff suite). Indeed, the meaning has drifted enough that the collective "macros" is now sometimes used for code in any special-purpose application control language (whether or not the language is actually translated by text expansion), and for macro-like entities such as the "keyboard macros" supported in some text editors (and PC TSRs or Macintosh INIT/CDEV keyboard enhancers).

Another explanation is that it is a shortening of "macroinstruction" which means:

a single computer instruction that initiates a set of instructions to perform a specific task

To follow on from mgkrebbs' fine answer, the SCAT in question is a SHARE 709 assembly program: "SHARE Compiler, Assembler, Translator". Both SCAT and macro are mentioned in papers presented to the Association for Computing Machinery and IIT Research Institute in 1958.

The earliest, ACM's Preprints of summaries of papers presented at the national meeting, tells us "The compiler expands each macro into one or more words of machine code ..." (1958 confirmation):

The next, IITRI's Computer Applications: Proceedings, shows we might have called them pseudos:

Finally, macroinstruction is found in 1956's Proceedings of the Western Joint Computer Conference: