Like every other group of 18 year olds who were slightly miffed at the censoring (and re-censoring) of certain songs in L:RB, we decided that we were going to make our band name/albums related to things that may be censored by humans with brains, but certainly not by a machine.
Thinking of a band name that was suggestive, but not too obvious was taking longer than a minute, so I opened the text box on the PS3 version to enter in the next thing that someone said. The randomly generated band name that was there? "Bedtime Balloons". We laughed about it for a couple minutes, then we used it as our band name.
It's a reference to condoms, because they're 'balloons' that you'd use in bed with someone