In The Letters of JRR Tolkien (#144) he writes:
Orcs (the word is as far as I am concerned actually derived from Old English orc 'demon', but only because of its phonetic suitablility) are nowhere clearly stated to be of any particular origin. But since they are servants of the Dark Power, and later of Sauron, neither of whom could, or would, produce living things, they must be 'corruptions'. They are not based on direct experience of mine; but owe, I suppose, a good deal to the goblin tradition (goblin is used as a translation in The Hobbit, where orc occurs once, I think) especially as it appears in George MacDonald, except for the soft feet which I never believed in. The name has the form orch (pl. yrch) in Sindarin and uruk in the Black Speech.
So Orc is demon, as opposed to "Goblin" (which seems to me more closely related to ghost -- at least in our modern understanding). They're not far apart, really. But Goblin does sound less threatening (more Caspar-like than Satanic). I suppose the old word for demon seems more suitable, it certainly sounds more terrible than "goblin".
Maybe Tolkien did just like the sound of it better!