An old English name with even older Nordic roots. It's derived from the Old Norse word "Kolbyr", which means "cold settlement". Also a kind of cheese, but don't bother joking about it with someone named Colby. I guarantee you they've already heard it.
You might not want to name your kid this if you live in the southern U.S. People there have a habit of saying "Koby" instead, and it might drive them nuts.
A lot of these definitions for "Colby" are obviously written by some guy who's really insecure about the size of his member.