Z71 was and is just the option code for special off-road suspension.
THEN, as in more recent years, it transformed from that to also being an appearance thing, especially on the SUV's.
Z66, on the Avalanche (we had one), was a creative way of marketing the same appearance pieces as a Z71, but with a "Premium On Road Ride" suspension for 2wd only models, that really lived up to the moniker. It was a great package, when it was offered for 2wd's.
Really, as far as the name, both were just codes...but the marketing departments in GM one day just decided those codes sounded fitting enough to actually become emblems & stickers on the vehicles, and option packages titled as such. Z66, for instance, was reminiscent of Route 66 and cruising it.