@eythian @b0rk @palin The disk encoding uses "group coded recording", or GCR, on the disk surface. These are 5-bit codes with certain properties useful for magnetic media. Of the possible 32 binary values that have these properties, only 16 are valid. Hence, each five bit group records a single nybble.
If you copied a disk one group at a time, you could overcome some copy protection schemes that rely upon invalid group representations.
Software that focused on copying disks this way are called nybblers because they focus on copying data one group at a time, in effect performing error correction at the individual group (hence, nybble) level.