Well, "schmettern" (verb) literally means to smash or to belt something. "Schmetterling" comes from the old Slavic "Schmetten", meaning cream (the one you skim off milk), but it sounds more like it comes from "schmettern", which is a word still in use.
The "schmett" makes me think of the mess that's left if you squish one.
EDIT: Curious about the etymology of the German word, and the "schmett" part means "cream," which is similar to the "butter" part we use in English. The closest word an English speaker might recognize is probably the Yiddish "schmir."