It was about encryption ciphers, when the US had export restrictions on key lengths. U = USA = 128bit, I = International = 40bit, N = None. Nowadays the U is another vestigal piece of the UA string.
Quick search answered my own question - 'U' indicates USA; As a result of cryptographic export restrictions, different levels of security were shipped in early browsers: U(SA) = 128bit, I(nternational) = 40bit, or N(one).
Mozilla/5.0 (Windows; U; Windows NT 5.1; en-US) AppleWebKit/525.13 (KHTML, like Gecko) Chrome/0.2.149.27 Safari/525.13