The ship's name may have originally meant "Wraith ferry," but Snorri Sturluson in the Prose Edda provides a folk etymology of "Nail ferry" (nagel, "nail"), urging that no dead be buried with uncut fingernails, lest any more material be added to it. This lore could not have assumed this form had it not been for a funeral custom of paring the nails of corpses and the desire to make this a pious duty. It has also been suggested that Snorri's "nail ferry" or "nail-farer" is an metonym for a ship which is constructed with nails.
From: http://en.wikipedia.org/wiki/Naglfar