Whether you write fantasy, horror, YA or science fiction, you may someday have an idea that demands you name a demon. Heck, if you're writing with a crazy person, you may have to create a demon that exists only in your insane character's mind.
When I saw a post on http://www.nanowrimo.org in the Horror genre forum asking this question, I got intrigued and answered with a long post. Two responses convinced me I'd written a good essay on the subject instead of just swamping the thread with too much blather. So here it is, reposted fresh from the Nanowrimo forums!
Allegorical names can work for demons. First, think of a cultural flavor, whether this is a Latin-sounding (Western Judeo-Christian type of demon with or without actual Judeo-Christian religion), or a Hindu type of demon, Chinese type of demon, choose a cultural matrix. This will give you interesting foreign words to play with.
It's elegant to take a word like "Corruption" and then turn it into an anagram. Readers will figure it out somewhere along the line in enough rereads and think it's cool. Roctirpion is one anagram I just came up with. Move the letters around till it's pronounceable and has a flavor.
Titivillus or Titiviliius is the actual demon of typos - mistakes in copying - got that from my calligraphy book. I was always amused that they had a demon of typos. Medieval European. That's who to cuss by if your spell checker let your heroine comb her hare.
Nyarlathotep has an Egyptian sound to it because "hotep" is a common ending in Egyptian names. Lovecraft was elegant with that one, he also tied Nyarlathotep to an Egyptian cult and gave him panthers, he was one of the few Mythos deities who could not only appear human but rather attractive. He stole whole chunks of Dionysus for Nyarlathotep, including those panthers and causing madness, in a much scarier way than the obvious god of wine and revelry. Stick a Greek god with a quasi-Egyptian name and a few extra adjectives, suddenly he's the Gateway to all the rest of the Lovecraftian horrors and of course, wonderfully foreign, so foreign he's not even from Earth.
If you started with the Chinese word for Corruption and threw in "of innocents" and just looked it up in a translation program, you'd have a Descriptive Name that still sounds foreign to most readers. Those who speak Chinese will recognize "this is a Chinese demon with a descriptive name."
You can even use Descriptive Names in English depending on your culture. What if the Seven Deadly Sins were characters? I've run into many effective demons with names like "The Eater of Souls" or of course that glorious cheat, He Who Must Not Be Named or The Unnameable.
Even more common is The Unpronounceable. Take some root words. Start replacing most of the vowels with extra consonants. Make sure there's at least one X and use plenty of C or K and other letters that have more than one pronounciation. Great Cthulhu had to be intoned perfectly. But the C is usually pronounced as if it was K and "uh" gets inserted before the "thu" syllable. Kuthooloo is how it's usually pronounced.
Manage to say it in another way and eww, you might be opening up the ancient ways etc. etc. Do Not Speak The Name stuff.
The other reason for The Unpronounceable is that in many mythologies, if you can pronounce a demon's name you can command the demon. They don't take orders from people with foreign accents but are bound to if you get all the ritual elements right. Or at least they can be banished by name if you get the pronounciation right. So all the mama demons give the baby demons names that are very hard for humans to pronounce. Or whoever/whatever it is that creates demons.
Using phonemes that aren't in English, like the click sound in !kung language that gets represented by the ! can create a seriously Unpronounceable demon name. But this will also confound readers, who'd like to read the book aloud to their kids because scaring small children is fun. So again, you come up with Looks Unpronounceable, but there's a pretty good trick to finding a way to pronounce it. Like inserting "uh" for the missing vowel sound.
Or put the vowels in but make it very phonetic, like Kuthooloo.
Take more than one root language and mix them. Where did Nyarla come from in Nyarlathotep? Not sure, but it doesn't sound as Egyptian as "hotep."
If you have more than one demon on stage, it's good to come up with a pattern for the demonic names.
They can be short. Dagon is a very effective one, also from H. P. Lovecraft.
Zuruz, Liril, Aginiga, palindromes make great demon names. Katak.
Or long palindromes to approach the Unpronounceable. Ziragildadligariz - I tend to hang palindromes on a pivot letter but you can make them with even numbers of letters and complete repetition.
Have fun with it. Then jot the method in case you need more demons of the same type in later novels or as side characters, minions, etc. Enjoy!