The original meaning of byte was a variable number of bits to represent a character, joined into a larger word that reflected the machine's internal structure. The IBM STRETCH machines could change how many bits per character. This was originally only 1-6 bits [1] because they didn't see much need for 8 bit characters and it would have forced them to choose 64 bit words, when 60 bit words was faster and cheaper. A few months later they had a change of heart after considering how addressing interacted with memory paging [2] and added support for 8 bit bytes for futureproofing and 64 bit words, which became dominant with the 360.

[1] https://web.archive.org/web/20170404160423/http://archive.co...

[2] https://web.archive.org/web/20170404161611/http://archive.co...