I know there will be a weaver or two who will claim this is totally false, and well it might be, but I will use it anyway, since I did track it down on a naval search.

On Early sailing ships ropes and lines were made from yarn, which was spun by hand and later spliced or woven into larger sizes or used to repair existing ones. Leisurely, relaxing work, it required only the use of the hands, and sailors could sit around and tell stories or gossip as they did so. Tales, jokes, and anecdotes became known as "yarns" because of their origins from this activity.

As a side note, Ropeyarn Sunday comes from this. However, that is another story!