There are several theories about the origin of this informal British term for a toilet.
The first, and most popular, is that it derived from the cry of 'gardyloo' (from the French regardez l'eau 'watch out for the water'), which was shouted by medieval servants as they emptied chamber pots out of upstairs windows into the street. This is historically problematic, since by the time the term 'loo' is recorded, the expression 'gardyloo' was long obsolete.
A second theory is that the word derives from a polite use of the French term le lieu ('the place') as a euphemism. Unfortunately, documentary evidence to support this idea is lacking.
A third theory refers to the trade name 'Waterloo', which appeared prominently displayed on the iron cisterns in many British outhouses during the early 20th century. This is more credible in terms of dates, but corroborating evidence is still frustratingly hard to find. Various other colourful theories also circulate, involving references to doors numbered '00' or people called 'Looe'.