Now, in the Medieval period, the people of Gotham gained a reputation for being fools. One much later account records them:
...some of the inhabitants engaged in endeavouring to drown an eel in a pool of water; some were employed in dragging carts upon a large barn, to shade the wood from the sun; others were tumbling their cheeses down a hill, that they might find their way to Nottingham for sale; and some were employed in hedging in a cuckoo which had perched upon an old bush which stood where the present one now stands.
This may all have been a subtle ruse, because madness was once considered contagious. So the people of Gotham just wanted to be left alone. But, either way, Gotham became a byword for foolishness, and the people of Gotham became a byword for Fools.
Now, we must journey forwards a few centuries, past the accidental discovery of a continent named America, to a chap called Washington Irving.
Washington Irving was living in New York (which has fewer castles than the old one) and was working for a satirical magazine called Salmagundi. Salmagundi had the sole porpoise of making fun of the good people of New York, and so, in 1807, in the 17th issue, Mr Irving referred to New York as "Gotham". This was nothing to do with Goths or anything like that. It was merely to imply that New Yorkers were all as foolish as the people from the goat farm.
Anyhow, Washington Irving was a New Yorker (who have few castles than Old Yorkers). He was thus and therefore acquainted with Herman Knickerbocker who represented New York in Congress. They were good friends and Irving said that they were like family. Mr Irving also had a plan to write a parodical history of New York under a pseudonym. As New York had originally been New Amsterdam, the pseudonym he chose was a Dutch one, based on his friend.
A History of New-York from the Beginning of the World to the End of the Dutch Dynasty, by Diedrich Knickerbocker came out in 1809. And, for our purposes, the important thing about it was that it fixed Knickerbocker as the stereotypical Dutch name. From then on, the original Dutch settlers of New York were called the knickerbockers, and the funny trousers (or pants) that they wore were called knickerbockers too.
Popularised by Mr Irving, and by George Cruickshank's illustrations, knickerbockers became a generalised term for odd bits of clothing worn beneath the waist. And thus and therefore, though American ladies wear panties, Englishwomen to this day wear knickers, which is just short for knickerbockers.