Several days ago I reposted a photo from Failblog re a light switch labeled "smallpox," and added a few comments re the possible mechanisms of the "chinglish" mistranslation.
Today I encountered a lengthy and superb discussion of this same topic at Language Log.
The problem arises because the word for "ceiling" in Mandarin is TIAN1HUA1BAN3 天花板 ("heaven flower board," a reasonable enough term since proper ceilings were decorated and "heaven" signifies "above," hence, "a decorated board above"), while the word for "smallpox" is simply TIAN1HUA1 天花 ("heaven flower[s]"). Obviously, the label on the left should have been "ceiling light," not "smallpox."...See the link for an extended discussion, which led me to the photo above of a Bangladeshi girl afflicted with smallpox in 1973. The lesions - especially where not confluent, as on her arms - really do look like little flowers...
There is much controversy in the medical literature over just why "smallpox" is called TIAN1HUA1 in Chinese. Most people would agree that the HUA1 ("flower[s]") part refers to the appearance of the pustules that cover the body of the afflicted.