O_o is a pretty common Japanese-style smiley, and is a variation is "o_o" or "O_O" It indicates varying levels of surprise/confusion, like you have your eyes wide open. Using capital O's (O_O) indicates you're really shocked by something. "o_o" is less so, and "O_o" is slightly more confused--one eye's really wide, and the other isn't quite so huge. It's a little like raising an eyebrow, I suppose, but not quite. This one's commonly followed by a sweatdrop, too.(example: "o_o What the heck are you talking about?" "O_O Yeeks! Put your clothes back on!" "O_o;;; What on earth are you doing? Get away from me...")

It's generally used by American otaku looking too make themselves seem cute, as are most Japanese smileys. It's seen all sorts of places, like blogs, IRC chats, other chats from various messenger services, and the websites of fangirls. It's pretty difficult to avoid among the anime web, actually, and is used by males and females alike. People like to use it when something bad happens, when something's surprising, or... well, when they're startled.

more examples:
"O_o You like hentai? Ewww!"
"o_o I just got attacked by a wallaby! Yeeks!"
"O_O Oh no! My favorite character in (some anime/game) just died!"
"o_o You like tentacle porn too? Wow!"