The modern definition of finite automata (deterministic and nondeterministic) appears in the foundational paper of Rabin and Scott, Finite automata and their decision problems, which also introduced nondeterminism in general. Here is what they had to say:
Turing
machines
are
widely
considered
to
be
the abstract
prototype
of
digital
computers;
workers
in the
field, however,
have felt more and more that the
notion
of
a Turing
machine
is too
general
to
serve as
an accurate
model
of
actual
computers.
It
is
well
known
that
even
for
simple
calculations
it
is
impossible
to
give
an
a priori
upper
bound
on the amount
of
tape
a Turing machine
will
need
for
any
given
computation. It
is precisely
this
feature that
renders
Turing’s
concept unrealistic.
In the
last
few
years
the
idea
of
a
finite automaton
has
appeared
in
the
literature. These
are
machines having
only a finite number
of
internal
states
that can be
used
for
memory
and computation. The
restriction
of
finiteness
appears to
give
a better approximation
to the
idea
of
a physical
machine.
Of
course,
such
machines
cannot do
as
much
as
Turing
machines, but
the advantage
of
being
able
to compute an arbitrary
general recursive
function
is
questionable, since very
few
of
these
functions come
up in practical applications.
Many equivalent
forms
of
the
idea
of
finite
automata
have
been published.
One
of
the
first
of
these
was
the
definition
of
“nerve-nets”
given by
McCulloch
and
Pitts.
The theory
of
nerve-nets
has
been developed by
authors
too numerous to
mention. We
have
been
particularly influenced,
however, by
the
work
of
S.
C.
Kleene who
proved
an important theorem
characterizing
the
possible
action
of
such
devices
(this
is
the
notion
of
“regular
event” in
Kleene’s
terminology). ...
Originally, finite automata (in a very different form) were introduced as a model for neural networks in the brain (hence the name "nerve-nets"). Later on, a different motivation came up: finding a computational model which is more realistic than the much-too-strong Turing machines. Even later, regular languages were included in the Chomsky hierarchy, and it was realized that they are very useful for certain parsing tasks.
Unfortunately this history is usually skipped in introductory classes.
The name "regular language" (originally "regular event") comes from Kleene. His original RAND report "welcome[s] any suggestions as to a more descriptive term" (and mentions that it might be the same concept as McCulloch and Pitts' "prehensible"), but this comment was dropped in the journal version Representation of events in nerve nets and finite automata.
(Disclaimer: I'm not an expert on the history of computer science, so I might have gotten some of the facts wrong or presented them in a misleading way.)