DHMO is the shortened name for dihydrogen monoxide. It is the basis of a long-running joke because the words form a scientifically accurate name for water.
Water consists of two hydrogen atoms (dihydrogen) and one oxygen atom (monoxide), thus the joke. Together, the words can sound scary to some, such as the "di-" in dihydrogen and the association of monoxide with "carbon monoxide."
Many websites have written satirically about dihydrogen monoxide, thus creating the hoax. There is still debate over whether it is a formal or informal term, as scientists generally prefer to use hydrogen oxide as the chemical name for water without including the prefixes.