The Merfolk?

Grandpa Fish: Another possibility is that Merfolk were inspired by fish with roughly human-looking faces. This little fish, for instance. As for what this fish is, I don't know. I couldn't even find the origin of the image. It's just one of those floating around the Internet. Could even be a photoshopped hoax for all I know. But it makes a certain point: Some fish can look humanoid. That would be enough to get superstitious sailors started.