Foley sound was named after Jack Foley, he was the one who established this technique.
A Foley is a sound effect technique. They are created with a variety of props that can’t be properly captured. Footsteps, doors opening/slamming, glass breaking, rustling are just a few things they can create.
“For example, an introductory shot of a biker wearing a leather jacket might be enhanced if we hear his jacket creak as he enters the shot – but do we really want to hear it every time he moves? By adding the foley sound fx in post, we can control its intensity, and fade it down once the dialogue begins. Even something as simple as boots on gravel can interfere with our comprehension of the dialogue if it is recorded too loudly. Far better for the actor to wear sneakers or socks (assuming their feet are off screen!) and for the boot-crunching to be added during Foley.” http://www.sound-ideas.com/what-is-foley.html
Foley sound is made by Foley artists, they do this by watching the scene and add the sound FX to what they see. Some of their actions can include footsteps (running/walking), rubbing clothing, breaking objects, handling props and jostling each other.