This term is only a textual term for the scale, not the hobby itself. From what I can tell, it is derived from the fact that toy figures, most notably Mattel's Barbie, followed by Hasbro's GI Joe, are the source of this scale standard. This is not to say that all things that conform to this scale standard are toys, like some detractors propose. Indeed, some dollhouses and accessories in this scale are quite detailed and unsuited for "play."
The generic/cross-genre form of this hobby is referred to as Playscale Miniaturism because it is a form of miniaturism [as in miniaturist's hobby] that frequently, but not necessarily, makes use of dollhouse accessories. An example is when one miniaturist took a G.I. Joe Adventure Team Joe, placed it in a Barbie wheelchair wearing clothes fitting for a Viet Nam vet. That display was not traditionally GI Joe or Barbie, but it still fit the traditional definition of miniaturism. Since it couldn't be defined by its genre, it could only be defined by its scale, more traditionally known as "playscale."
While 1:6 remains technically accurate, it has historically been applied to engineering scale models, not the broader phenomenon of dioramas.