I have some familiarity with chemistry because of my work and was curious about this as soon as I read it.
My first impression was:
The "di" of dihydrogen would indicate "2". This suggests that this substance has two hydrogen atoms.
"Mono" in monoxide would indicate "1," suggesting one oxygen atom.
2 hydrogen atoms + 1 oxygen atom. That would just be water -- I became suspicious immediately.
So I decided to do a little Google search. Wikipedia suggests in an entry, with references, that the DHMO scare is a deliberate hoax created by some students in 1997.
WIKIPEDIAThe hoax was created by Eric Lechner, Lars Norpchen and Matthew Kaufman, housemates while attending UC Santa Cruz in 1990, revised by Craig Jackson in 1994, and brought to widespread public attention in 1997 when Nathan Zohner, a 14-year-old student, gathered petitions to ban "DHMO" as the basis of his science project, titled "How Gullible Are We?"
For the full article:
It looks like this is a further extension of the original hoax with sites like "DHMO.org" taking it to the next step of creating a scam out of it.