Do people mean "*flea market*" is like the dirty market which has a lot of fleas?

Dictionary treatments of 'flea market'

Here is a brief discussion of flea market in Robert Hendrickson, The Facts on File Encyclopedia of Word and Phrase Origins (1997):

flea market. These bargain markets have nothing to do with fleas. Flea market has been an American expression as far back as the Dutch colonial days when there was a very real Vallie (Valley) Market at the valley, or foot, of Maiden Lne in downtown Manhattan. The Vallie Market came to be abbreviated to Vlie Market and this was soon being pronounced Flea Market.

But Merriam-Webster's Eleventh Collegiate Dictionary (2003) identifies a completely different etymological source in its entry for flea market:

flea market n {trans[lation] of F[rench] Marché aux puces, a market in Paris} (1922): a usu. open-air market for second-hand articles and antiques.

Christine Ammer, The American Dictionary of Idioms (1997) seconds the Eleventh Collegiate's analysis:

flea market A market, usually held outdoors, where used goods and antiques are sold. [Example omitted.] The term is a direct translation of the French marché aux puces and presumably implies that some of the used clothes and furniture might be flea-infested. {1920s}

George Orwell's account of life as a plongeur in Paris in Down and Out in Paris and London (1933) made a very vivid impression on me—especially the descriptions of marching columns of bedbugs emerging from the wallpaper each night—so I can well imagine that marché aux puces did refer to the bonus bugs that came at no extra charge with purchases obtained there.

'Flea market' in Google Books results

Who brought marché aux puces to the shores of the United States? The earliest use of the phrase in Google Books search results doesn't involve sellers of used goods at all. From Richardson Wright, "The Beggars of Moscow," in The Bellman (July 11, 1914):

The Khirov Rinok, or the lodging-house of the poor, is known among the beggars as the "Flea Market," for reasons which need no explanation. In summer the beggars sleep out of doors, crawling under the shelter of buildings, sleeping under the stalls in the fish market, or on the benches along the banks of the Moscova. In the winter, when even the most sheltered corner is swept by a pitiless blast, sleeping out of doors spells death. So the beggars, having eaten at a "doss" house go over to the "Flea Market," where clot the pickpockets, the criminals and the birds of passage.

The first English-language mention of the Paris Flea Market appears in The New Age, a socialist periodical published in England. From Alice Morning, "Impressions of Paris," in The New Age (November 18, 1915) [combined snippets]:

I let myself be dragged to the Flea Market to pick up an old stove for nothing, it being iniquitous to buy anything new. It may be iniquitous, but it is not necessarily uneconomical. The few stoves were old enough to know that they are made in the invaded regions and cannot be replaced just now. Why one smiles red hot for ten minutes and sulks for the rest of the day. The Flea Market is something like nothing I know of in England. Miles of open ground give you a chance to dump your old rubbish for a franc or so almost where you please. Every thing from old beds to old buckets, old hair-brushes, and scrap-iron are laid out, and you say, as a matter of course, after you have asked the price, “"My friend, you joke!"

Jean Martin, Captivity and Escape (New York: 1918) devotes an entire chapter to describing the area in a World War I prisoner-of-war camp that he calls "the Flea Market"—no doubt named after the one in Paris that caters to unincarcerated customers.

The crucial instance responsible for the conveying the translation flea market to the United Sates may have been George Dougherty, In Europe (1922) [combined snippets], published in New York by Pusey Press:

Today we left the hotel in automobile at 10:00 A. M. to Fountainbleu, another King's Palace, situated in the Forest of Fountainbleu of 48,000 acres. We went via Ave. d' Itali and the "Flea" Market, both very interesting because of the numerous Paddy's markets along the route for miles, patronized only by the poor and at which every known article is shown and sold. It is called the "Flea" Market because there are so many second hand articles sold of all kinds that they are believed to gather fleas. This is where one sees the real Apache with the corduroy suit and cap and the wooden shoes, and the tough black haired girl without a hat. The kind with the communade face, ready for anything.

Or perhaps not. That excerpt offers a rather slender basis for claiming responsibility for the successful wholesale importation of a translated French phrase into the U.S. English vocabulary. But at least the date matches Merriam-Webster's. In any event, Google Books doesn't identify any other candidate from 1922 to play the same role.

Not until John Ware, How to Find Old Paris (1927) [combined snippets] do monolingual English readers learn the (possible) truth about the original meaning of marché aux puces:

Saint-Médard is no better than, and lacks the noise and movement of, Mouffetard, but twice a year it stirs from slumber, and then there is action a-plenty, This is the home twice a year of an "ole cloes" sale, which bears the euphonistic name of Marché aux Puces. If you are squeamish, you may translate this Flea Market, though Puce means a word that rhymes with House, not Sea. A Lou—excuse me—Flea Market is an education of a kind, for it is a study in what some Parisians consider still wearable. When clothes in this neighbourhood come to a condition where they are no longer serviceable, it would seem that the ragman is the next stop, but to believe that is to disregard another set of Parisians.

The treatment of louse as a taboo word is striking. Technically, Ware is wrong, since the French word for louse is pou (plural poux), but one can imagine a bit of euphemizing on the French side to turn poux into puces at some point in the market's history. I don't know whether Ware simply made up the link to lice, but it doesn't seem altogether far-fetched.

The first reference to a home-grown U.S. flea market in the Google Books search results appears in Eloise Richards, "A Spokane 'Flea Market,'" first published in The Christian Science Monitor and reprinted in Hobbies, volume 38, issue 5 (1933) [combined snippets]:

Added to things brought from Paris were local purchases, found by hunting through all the second-hand stores in town, where she discovered some lovely old things and others just old, but odd. Then farms and auctions were visited. Soon the long room was filled with old chests, chairs, tables, china, brass, picture frames, iron, furniture. Like the real Flea Market, you can find almost anything there.

Conclusions

It seems fairly clear that Merriam-Webster correctly identifies the source of flea market as the famous marché aux puces in Paris. No doubt Americans became familiar with this institution during Word War I and brought home the memory of it at war's end. The accuracy of MW's 1922 first-occurrence date for the phrase in English is debatable, however, as Google Books finds earlier instances of flea market from 1914 (in a U.S. article about lodgings for the indigent in Moscow), from 1915 (in a British article about the Paris marché aux puces), and from 1918 (in a U.S. book describing a market area in a German prisoner-of-war camp for Allied prisoners). The book published in the United States in 1922 that does mention the Paris marché aux puces as the Flea Market does so in a single paragraph, with little fanfare.

Probably yes. The OED reports that flea market comes from the French marché aux puces, which was a market where used furniture and clothing were sold, which might have fleas.

An alternative theory is that the term came from the Fly Market in Manhattan back in the 18th century, which itself was from the Dutch word for valley, Vlie but this is considered less likely.