The great late Damon Knight … strongly objected to people calling their small, short-tailed, fluffy animals, smeerps—when they could perfectly well have called them rabbits instead…. [I]f you are inventing a world different from our own, by all means call whatever is really different by a really different name. Just make sure you don’t merely call a horse a glymph.
Worlds of Wonder:
Occasionally, you may feel the need to make up a new word…. Sometimes you can do this to great effect, but not always…. When you are writing science fiction or fantasy, you will always be tempted to make up new words—especially technical-sounding terms like quadro-triticale and veeble-fetzer…. As a general rule, you should always be wary of inventing new words.
Fantasy authors have just as much responsibility as their less fantastical comrades to ground their stories in a sense of reality. Consider the languages spoken in your fantasy world. How has history and technology influenced the etymology? Why has this particular item gleaned this particular name? If you know why something is called a smphurphle, go for it. Otherwise, you’re probably better off toning it down to a less attention-grabbing word, so as not to prod your readers’ suspension of disbelief bubbles.