In the latest releases, names for things have started to be less random (e.g. diety names are related to their sphere of influence). Since parent/child and spouse relationships are tracked now, and we can discover a lot about them in legends mode, a revamp of the older name systems might be in the works.
Right now, all the named people and creatures get a randomly generated name. Non-kobold civilization creatures are named Word1 Word2Word3, where the three words are all picked at random from the appropriate language file. Disadvantages include: children's names have no relation to their parent's names; males and females use the same set of names; there are no common names (all are equally rare, and the two-word part is usually unique).
Rather than ask for a naming system identical to that used in my culture, I decided to do a little research into real-world naming systems:
United States, the system most of you will be familiar with:
PersonalName MiddleName FamilyName
MiddleName is usually a second personal name
wives change their FamilyName to their husband's FamilyName upon marriage
wives sometimes replace their MiddleName with their original FamilyName
all children are given the same FamilyName as their father
Spain, a more gender neutral system:
PersonalName FatherFamilyName MotherFamilyName
wives do not change their names
all children: PersonalName [father's FatherFamilyName] [mother's FatherFamilyName]
Iceland, a system using patronymics instead of family names:
PersonalName ParentName
wives do not change their names
sons: PersonalName [father's PersonalName]son
daughters: PersonalName [father's PersonalName]dóttir
occasionally the mother's PersonalName is used instead (a matronymic)
the parent's PersonalName is put into the genitive case, e.g., Eric -> Ericsson/Ericsdóttir
China, a system using a different order for the parts of the name:
FamilyName GenerationName PersonalName
wives may become: [husband's FamilyName] FamilyName GenerationName PersonalName
all children take the same FamilyName as the father
GenerationNames are used by some families:
siblings and cousins of the same generation all share the same GenerationName
each family has a fixed, repeating sequence of GenerationNames (often the syllables of a generation poem)
treated as part of the personal name
all children use the father's family's generation naming system
Arabic, an unusually complicated system:
ChildName PersonalName Descriptive MaleAncestorName(s) GroupName
not everyone uses the whole set of name-parts, but it isn't uncommon
Childname acts as a sort of honorific or indicator of adult status
father: Abu [eldest child's PersonalName] (father of ...)
mother: Umm [eldest child's PersonalName] (mother of ...)
childless (and some other) adults may adopt a metaphorical ChildName
Descriptive ascribes a quality to the person (e.g. al-Jamil, "the beautiful")
the sequence of MaleAncestorNames name the person's father, grandfather, great-grandfather, etc.
most MaleAncestorNames: bin [father's PersonalName] (son of ...)
daughter's first MaleAncestorName: bint [father's PersonalName] (daughter of ...)
GroupName is often an occupation, country-name, tribe-name, or true family-name (e.g. al-Filistin, "the Palestine")
So, there are all kinds of possible naming systems. We could have a different one for each race, or even a different one for every country. Humans could use patronymics, Dwarves occupation names, Elves place names, and Goblins religious names (e.g., Demonslave, Fireworshipper). Dwarves, obviously, should use a gender-neutral system.
Names could be assigned by a variety of systems during the age of Myth, then become fossilized into family names during later ages, in the same way Johnson no longer means your father's name is John, and Smith doesn't mean you are one.