Pygmalion was a king of Cyprus, a mythological character who fell in love with a statue of a woman he'd created. The statue was brought to life by Aphrodite. The story's about expectations based on perceptions. The modern usage of the term, however, means 'self fulfilling prophecy' derived from expectations, which is actually not the same thing. It's based on the theory that expectations create actions, mindsets and behaviors derived from the original premise.
Examples of Pygmalion Effect:
|My Fair lady storyline: Making a lady of a Cockney flower girl|
Situations created by false expectations which affect behavior (Robert Merton's definition, social theory)