Fond Memories of Märklin Mini-Club
Anyone remember this brochure image? As soon as I saw it, I thought, "They could not possibly have found three more German-looking people."
What's even more amusing, two of the three people aren't even paying attention to the trains, probably having a laugh at how absurd it all is. And the third is saying, with a chuckle, "Das iss zum teenzy trainz!"
All kidding aside, Märklin did
some top-notch marketing for their product line. But why Z? Märklin was already following the herd with O and HO scale products. When N Scale
arrived in the early 1960s, they refused to be an also-ran, and set out to invent their own competitive scale. Their engineers developed the
smallest motors possible, and built models around them. 
The
results were 1:220. And they called it "Z" because it's the last letter of the alphabet, and they were convinced it would forever
remain the smallest model railroading scale.
They were right—for many decades. But eventually there was T Gauge (1:450), as well as other novelty scales. But I believe Z remains the smallest practical scale; indeed, they stand right at the cusp of what's physically feasible. Because, while one can make much smaller trains, reliable operation becomes increasingly more difficult. As it is, I find Z Scale ever so slightly beyond practical, and so I remain loyal to N Scale.