Yeah, horses are named whatever their owners want to name them, but it's a great tradition to name your horse something that relates to a famous sire/grandsire/dam whatever.
E.g. Two of Man o' War's sons were War Admiral, who won the triple crown, own Battleship, who won the derby. (Not to mention Man o' War's dad, Fair Play, sired Display, Mad Play, Chance Play, Mad Hatter, My Play etc...)
There ARE a lot of rules in naming though, like no initials, no horsey words, no corporate names (eg you couldn't name a horse "Viagra" or "Target". Could you imagine sponsered horses, like race cars?), nothing with numbers under 30 (2nd's in third place, coming up on the outside! 2nd's moving into second!), nothing vulgar, and no names of certain famous horses (like hall of fame, eclipse winners, stuff like that - so you can't name your horse Omaha or whatever).
you can see all the rules <a href="http://horseracing.about.com/gi/dynamic/offsite.htm?site=http://home.jockeyclub.com/rules/rules.html%23rule6">here</a>.
People always seem to like making stupid puns out of names though. Some examples I'm stealing directly from that same website: Hoof Hearted, Isitingood, and Peony's Envy
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