(noun) - A thumbnail is a tiny sketch, so called because it is typically about the size of an actual adult thumb's nail. Thumbnails, in the context of art, are rapidly executed near-doodles, and serve to get the creative flow flowing. They are preliminary designs. Wait, strike that. A thumbnail would fall into the category of a pre-preliminary design, if such a category existed.
Not to sound like anyone's great-grandmother, or anything, but "back in the day" (pre-PC) I remember (not fondly, either) covering sheet after sheet of paper with thumbnail sketches of an ever-evolving concept. It was the single best method of working out compositional flaws without spending a year or two on one design.
Now, of course, a person can hardly swing a metaphorical cat in cyberspace without whacking some site that invites one to click on this thumbnail or that to view a small, pixelated image. I suppose this is now the most common meaning of thumbnail. Those of us - designers, storyboard artists, etc. - who tackled thumbnails the hard way, tend to feel somewhat better about countless hours of work when the "old" definition is acknowledged, though.