Origin & History of “fancy”
Ultimately, fancy is the same word as fantasy (15th c.), from which it emerged by a process of contraction and gradually became differentiated in meaning. both go back originally to the Greek verb phaínein ‘show’ (source also of English diaphanous and phenomenon). From it was derived phantázein ‘make visible’, which produced the noun phantasíā ‘appearance, perception, imagination’ and its associated adjective phantastikós ‘able to make visible’ (and also incidentally phántasma, from which English gets phantasm and phantom). The noun passed into English via Latin phantasia and Old French fantasie, bringing with it the original Greek senses and also some others which it had picked up on the way, including ‘caprice’. The semantic split between fantasy, which has basically taken the road of ‘imagination’, and fancy, which has tended more to ‘capricious preference’, was more or less complete by about 1600. The quasi-Greek spelling phantasy was introduced in the 16th century, and has persisted for the noun, although the contemporary phantastic for the adjective has now died out. The Italian form fantasia was borrowed in the 18th century for a fanciful musical composition. (Fancy and fantasy have no etymological connection with the superficially similar fanatic, incidentally, which comes ultimately from Latin fānum ‘temple’.).