According to http://www.geocities.com/rgfdfaq/sources.html
Lich, lych - A lychgate is an entrance to a churchyard where a body rests before burial--"lych" means person or dead body (From German "Leiche", meaning "dead body, cadaver, corpse"). The D&D lich is very similar to a character from Taran Wanderer, by Lloyd Alexander, a magician with an unnaturally-extended life who can only die if the item in which he has stored his soul is broken (in this case, a bone from his little finger); however, the term "lich" is never used in the book. The origin of both the D&D lich and Alexander's character is probably the Russian folkloric character "Kotshchey the Deathless", an unnaturally long-lived magician (or demon) who was almost impossible to kill. (Kotshchey himself was written up with D&D stats in The Lost Caverns of Tsojcanth, reprinted in Monster Manual II.)

(Dungeons & Dragons)
Rulebook featuring "high magic" options, including a host of new spells.