Its use in "The Simpsons" was accurate; Bart starts a rumour by whispering to one person who whispers it to another, etc. By the time the rumour reaches the front of the crowd, the phrase "Purple monkey dishwasher" has been added to the end due to people mishearing the original rumour as it passed from person to person.
Due to the popularity of "The Simpsons", the phrase has since become a commonly used response to opinions stated based on hearsay and unconfirmed rumours.
Person B - "Purple monkey dishwasher."
*In "The PTA Disbands", an episode of The Simpsons, Bart attempts to spread "Skinner said the teachers will crack any minute" throughout the crowd of Springfield Elementary School teachers. By the time it reaches Mrs. Krabappel, it has turned into "Skinner said the teachers will crack any minute, purplemonkeydishwasher."
*Taken from Wikipedia