As far as I'm aware, "Foggy" is a nickname, derived from the traditional song "The Foggy Foggy Dew"; but it could also be because, in his earlier episodes, he would occasionally "blank out" everything around him to help him concentrate, particularly when he was thinking up new ideas or finding solutions to problems. It is quite noticeable in "The Man from Oswestry", but he also does it in "A Merry Heatwave" and "Tight Jeans and Metal Detector" among others.
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