Why are traditional style cockpits with gauges called 'steam cockpits'? Do the instruments actually run on steam?
Well, to answer your second question first: no. No aircraft instruments actually run on steam. There are lots of safety issues related to generating and using the steam on board an aircraft that are prohibitive.
As far as why they are called steam gauges, take a look at one and compare it to a traditional flight instrument:
They are both round, both have a calibrated scale printed on them, and both have a needle which points at the current value. They actually look pretty similar!
I never heard the term "steam gauge" until there were glass cockpits - but maybe that is just me. A "steam gauge airplane" is a mildly derogative term to indicate that the plane has instruments that are old fashioned, borderline obsolete. But they work just fine! I fly a steam gauge airplane.