The original project Indiana was actually led by Ian Murdock, better known as the founder of Debian.
Ian Murdock grew up and lived in Indiana so there is no wonder why he chose this project name.
The initial Solaris Express project which stemmed from Solaris 10 and preceded Indiana was codenamed Nevada.
There have been several discussions regarding a name change but I think for now and considering the recent passing of Ian Murdock the name will stick a little longer.