It's not that weird. 'con' is a reserved word from the old DOS days, simply meaning 'console'. If you wanted to create a new text file in DOS you could type 'copy con newfile.txt' meaning copy from the console to newfile.txt. This would let you type some lines and when you ended the file with ^Z (DOSish for 'end of file') you would have a file called newfile.txt containing whatever you wrote in the console. This is indeed still possible in the Windows XP console, and can you see what mess it would cause if you let files or folders have the name 'con'? What would 'copy con newfile.txt' then mean? BSOD?
List of other DOS devices that can't be used as folder names:
CON, PRN, AUX, CLOCK$, NUL, COM1, COM2, COM3, COM4, COM5, COM6, COM7, COM8, COM9, LPT1, LPT2, LPT3, LPT4, LPT5, LPT6, LPT7, LPT8, and LPT9.