I've been infected by one. According to this article on Wikipedia, O RLY got started over on a site called 4chan, an enourmous image playsite. The text-messagy tetragrammaton is apparently intended as a reference or perhaps a mockery of AOL speak or text contraction, and actually means "Oh, really".
It typically appears as an "image macro", that is, text merged with a picture, typically Photoshop. During O RLY's stay on 4chan, some wag wordfiltered "repost" to the word "owl", and a beautiful and very silly thing was born: the O RLY owl, the iconic example of which you will find illustrating this post.
That dam' snowy owl is so danged silly and cute I couldn't get it out of my head...
O RLY, it is said, is best served sarcastically or mockingly, as in a response to a dead stupid question (yes, there are such things): "Fire is hot!" "O RLY?" Typical response is "YA RLY!", which a likely reply is "NO WAI!", for which a further response would be "WAI!". The iconic responder seems to be a seriously-visaged horned owl. For those of you who know what a YTMND is, I would classify this as a relative.
Though someone posted the cover of the critique The O'Really Factor as an O RLY, it doesn't really qualify to me; it's just a posting of the cover with nothing added or played with. I thought that this serious subject deserved more of a disciplined approach, so, that being said, here's a screenshot of a concept I like to call The O RLY Factor:
Yes, I am almost a Photoshop godlette.
Update: fixed the spelling in the title-tag. How embarassng! Now to re-ping...