Wool soakers have been around almost as long as diapers - ask your grandma, chances are she wore wool soakers over her own diapers!
They're called soakers because that is what wool does - it soaks up the extra moisture, and disperses it through it's fibers to evaporate some of it off. Since wool can hold 30% of its' weight in water without feeling damp, it can go a long time gradually soaking up what's on the outside surface of the diaper before it will start to feel wet.
So, that's why it's called a soaker. It soaks. It's not meant to be "waterproof" - soakers never will be waterproof! A baby could pee right through a soaker no problem, if there isn't enough absorbent diapering material between the baby & the soaker. That's why a good diaper is so important for getting a soaker to work well.
A soaker *is* a diaper cover. But back before there were any other diaper-covering choices, soakers were invented, and that's why they're still called soakers. We could call them knitted pull-on diaper covers, but that's a big pain. Soakers it is.