I think Nilson is "son of
Nils". However, I know that a lot of people with the last name of Neilsen (son of
Neil) change their name to Nilson or
Nelson once they come to the States (in order to make it easier in terms of spelling and pronunciation). So, Nilson could be "son of
Neil"
Still, if Nilson is your father-in-law's given name, it was probably meant to be Nilson and not Nielsen, so I guess it means "son of
Nils".
Hope that helps