Metabetable at Mark’s China Blog posts some interesting examples of the literal meaning of some Chinese words:

Here are some of my favorite examples of what I’m talking about:
电脑
Chinese Pronunciation: dian nao
Literal Translation from Chinese to English: Electric brain
English meaning: Computer

[...]

同意
Chinese pronunciation: tong yi
Literal Translation from Chinese to English: Together meaning
English meaning: To agree

手机
Chinese pronunciation: shou ji
Literal Translation from Chinese to English: Hand machine
English meaning: Cellular phone

And I have to agree that those are definitely interesting ones, and before I suggest some other fascinating Chinese words, I have to correct his translation on this one:

老外
Chinese pronunciation: lao wai
Literal Translation from Chinese to English: Old outside
English meaning: Derogatory name for foreigners

老外 is not a derogatory name for foreigners, it is in fact the complete opposite! 老外 means respected foreigner (remember that calling someone old there is a respectful gesture). The actual derogatory name for foreigners can vary, but one is 鬼了 (literally: ghost) meaning foreign devil.

The ones I personally think are fascinating:

    • Mother/female radical and son radical = good
  • 非洲
    • Dark/evil continent = Africa
  • 俄国
    • soon to be a country = Russia (although I personally think of 饿国 = hungry country)
  • 口水
    • Mouth water = drool
  • 难看
    • Difficult to look at = ugly
  • 荷兰
    • lotus orchid = Holland (think of what stuff they brought to China)
  • 面包车
    • bread car = van
  • 长城车
    • Great Wall car = limousine
  • 飞机
    • flying machine = airplane