"The DAO" was an attempt to create a virtual currency investment fund on the Ethereum network. I wrote about it from a legal perspective back in May. In the month following my blog post, The DAO reached over $150 million USD in value and was then hacked.
Unknown people exploited two vulnerabilities in The DAO's code to siphon off millions of dollars of ether (the virtual currency used by The DAO). The exploits caused a firestorm in the Ethereum community. The DAO is currently dead but the creators have promised that development will continue and they'll find a safe way to deploy their investment system.
There is currently a proposed soft fork of the Ethereum network (the system that The DAO was built on) that is intended to reverse the damage done by the hacker(s): https://blog.ethereum.org/2016/06/24/dao-wars-youre-voice-soft-fork-dilemma/. The soft fork will take effect if adopted by a sufficient number of the "miners", the people who supply computing power to the Ethereum system. You can view the balance of The DAO on Etherscan.io.
A good blog post on the challenges of writing secure code that runs on the Ethereum network: http://hackingdistributed.com/2016/06/16/scanning-live-ethereum-contracts-for-bugs/.