"Guru Govind singh was in search of a word which could have the sanctity of five and the presence of God. He adopted the word Khalsa for his Singhs because it fulfilled both the conditions in the most appropriate manner. Besides this word had already been used by Guru Hargobind for his Sikhs. In Persian script Khalsa conssist of five letters:
(i) Khe or Kh stands for Khud or oneself.
(ii) Alif or A represents Akal purukh, Allah or God.
(iii) LAM or L signifies Labbaik, which means
"What do you want with me? Here am I. What would
you have?"
(iV) Swad or S alludes to Sahib or Lord or Master.
(v) it ends with either A. Alif or A points to
Azadi or freedom.
The word Khalsa, therefore has the sacredness of number five as well as the presence of God with his singhs both engaged in a pleasent conversation."
taken from
http://www.sikh-history.com/sikhhist/events/khalsa.html