Lantern in this usage refers to anything that sort of looks like a lantern. A "lantern" tool post has a sort of cartouche-shaped opening into which one inserts the lathe tool. Viewed conceptually, it looks a bit like an antique lantern, the hole representing the "window" through which the candle flame was seen.
Jump forward to modern times (well the early 20th century) and a lathe chuck with a window to accept mushroom-headed parts comes to be called a "lantern" chuck. See this post...
http://www.homemadetools.net/forum/m...l-screws-26214
for my version of same for machining the ends of screws.
As you surmised, I carried the nomenclature over to this pin vise because it accommodates the handling of mushroom parts.
Nothing sacred about the name; if it looked as if it had grown underground, I would have called it the truffle pin vise. :-)

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