Lots of stories but every blind experiment shows its bunk. I can lead you to the old tiles in many fields because they are where I'd install them if I wanted to drain the field. If you believe in something, its easy to convince yourself. But what the heck, its fun!
I thought it was bunk as well....until it worked for me. I tried it and found where my well line went into my house. Because I was a skeptic I decided to have my wife try and she found it too. Now maybe I remembered where the line should be, but my wife had/has no idea where the line is or what she was looking for.
Maybe it was the iron in the water or something else that caused the coat hanger wires to cross, but they did.