A piece of hard candy on a stick, or in British English, an ice cream bar on a stick.
From late 17th-century English slang, possibly derived from 'loll' (to stick out the tongue) or 'lollapalooza' meaning something remarkable. The term became widespread in British English for sweets and confections, eventually spreading to other English-speaking countries.
The word 'lolly' shows how British English preserved old slang words that disappeared elsewhere—meanwhile, Americans adopted 'lollipop' (from the phrase 'loll and pop'), making the same candy have completely different names across the Atlantic!
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