Yes, that really is what it's called (chou doufu, in Chinese). It's fermented, and to call it "stinky" is to be extremely generous.
It had been a while since I'd encountered this stuff in any strength, and my first run-in this time around was in Hong Kong, over Chinese New Year. My cousin and I had turned off of one of the main roads in Mongkok to enter a big outdoor shopping area, and before we rounded the corner, I got a whiff of something that my brain first dismissed as rotting garbage. There was an empty lot across the street to our right, and I figured the smell might be coming from there. But as we made our way up the block toward the pedestrian mall, the smell got stronger, and started to conjure up images of raw sewage. The aroma got so intense that I started to gag, and I finally turned to my cousin and asked, "God, that's horrible -- what IS that?!" She nodded up ahead to a stall with people lined up three deep, and said "stinky tofu."

People who eat the stinky tofu swear that it's delicious. Some of them, despite acknowledging that it smells terrible, claim not to smell it while they're eating it (I have a cousin who falls in this category). I have no idea how this is possible, although I will say that some stinky tofu is much stinkier than others. The batch in Hong Kong was especially potent, at least compared to what I've smelled around Shanghai -- no small feat considering that it was about 50 degrees when I was in Hong Kong, while Shanghai has for some time now been seeing the temperatures at which urban smells really ripen and take on a special full-bodied texture.
I wish I could tell you what those bowls next to the frying tofu in the picture above are, but I can't. Even the stinky-tofu-loving cousins couldn't identify them either; they're not toppings standard in Hong Kong or Singapore. I'm not sure whether they're standard here, or particular to this cart. Sorry.
For those of you who want a more elaborate description from someone who's actually tried it (sorry, smell and taste are far too intrinsically linked for me; I can barely get within two feet of it), I like this guy's summary (do not read while eating!). Also includes references in the comments for any Californians who want to try it out for themselves, although there's no guarantee of currency. I have in fact heard of some places in the Bay Area having to shut down their stinky tofu operations because of complaints (disturbing the peace? nuisance violations? I don't know).