Sometimes, when you hear something really amazing or shocking, you need to come up with a response worthy of this situation. You're frantically hunting around for the right thing to say, when your brain, which you pretty well beat into oblivion long ago by hanging out on a street corner smoking crack, completely sells you out. And instead of the right word -- or any word, really -- you just say "word?". Or at least I'm convinced that is how this came into being as popular slang.
Random Bystander: Oh my God, that 40 ft gerbil is savagely raping a man!
Urban Youth: Word?