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c.1600, Dolly, a fem. nickname (see doll); 1790 as "child's doll;" applied from 1792 to any contrivance fancied to resemble a dolly in some sense, especially "a small platform on rollers" (1901). Doesn't look like one to me, either, but that's what they say.
The first mammal successfully cloned — Dolly, a sheep — was born in 1996 in Scotland as the result of work by biologist Ian Wilmut (see clone). The procedure that produced Dolly involved removing the nucleus from an egg cell and placing the nucleus of an adult sheep's mammary cell into it. Further manipulations caused the egg to “turn on” all genes and develop like a normal zygote. (See totipotency.)