The terminology is a combination of history and "trustworthiness" (for lack of a better term).
Historically, primary radar was invented first. So it makes sense that this would be called "primary" and another scheme invented later would be called "secondary".
ATC systems like to ensure that the data they are working with is trustworthy. Primary radar systems are based only on the reflected radar signals. If you get a reflection, you know there is something there, whether or not it has a transponder (or indeed, whether or not it is an aircraft). This is a certainly a key point in military radar systems, and ATC radar was derived directly from military radar.
With secondary radar (transponder) operation, there is no guarantee that the transponder isn't lying (whether deliberately or unintentionally). A faulty transponder could certainly report false locations to the ATC system. Or, you can probably imagine scenarios where a false location might be deliberately returned.
ATC systems take both the primary and secondary location information for an aircraft, and correlate them to represent one aircraft in the sky. They don't report the exact same physical location, so there is a degree of fuzziness in the system to account for that. If the two reported locations drift too far apart, you get an uncorrelated track. Sometimes, if two aircraft cross each other's track in certain ways, the ATC system can get confused and associate the wrong primary radar blip with the wrong transponder report. The controllers have procedures to deal with and correct these kinds of problems.
So, primary radar is primary because it (a) came first, and (b) is the most trustworthy source of aircraft location information. Secondary "radar" (which, as you point out, is not really radar) is called such because it is integrated within the primary radar system.
More generally, the various technologies for locating and identifying aircraft in airspace are collectively called "surveillance". Examples of ATC surveillance are primary radar, transponders, multilateration, ACARS position reports, and other technologies.