Wikipedia has much of it wrong….
Sometime in early 1979, Marvel’s in-house counsel and V.P. of business affairs Alice Donenfeld proposed that we create a super-heroine/singer character. She was hoping to set up a joint venture with a record company—we’d produce comics featuring the character and they’d produce and market music using studio musicians, as was done with the Archies.
Disco was big at the time. Virtually every bar with a dance floor played disco, from upscale nightclubs like the Ice Palace and Studio 54, to dance halls like the one seen in Saturday Night Fever to local joints.
I assigned Tom DeFalco and John Romita, Jr. to take a shot at creating the character. In my initial discussions with them, I believe, we came up with the notion of giving her light powers, and therefore, being able to provide her own light show. Hence the “Dazzler” part of the name “Disco Dazzler.” I don’t remember who came up with which parts of the above. I was the one who came up with the energy-transmutation rationale to explain her powers.