It is not clear how the story started. Some sources point to an earlier version of the tale in which a women ascended to the throne of the Patriarchate in Constantinople and was exposed when she gave birth The fable, they say, was merely transplanted to Rome. Others say the story was originally a satire aimed at the supposed effeminacy of Pope John VIII -- effeminate because he would not pursue heretics and infidels with the same vigor as his predecessors. Other researchers speculate that it may just have developed as a means of explaining (perhaps to overly gullible foreigners) the name of tiny Via Papissa, a street that was more likely named after a Pape family that, records show, lived on the street. What is clear is that there is no gap in the list of Popes that could accommodate the several year reign of the alleged "Popess."
The persistence of this legend is not hard to understand. Romans love scandals almost as much as American media people do, and the kind of scandals Romans like best are anti-Papal and anti-Catholic. The story has also been particularly popular with "low-church" Protestants (not an insult, but rather the way they are identified in classifications of Christian cults) and with authors, playwrights, and screenwriters who always need to find a way to make a buck. There have been several books about the Popess in recent years (following many more through the centuries) one of which, by Donna Woolfolk Cross, is very popular in Germany (2 million copies sold) and moderately popular in the US (100,000 copies). If you hadn't heard about the book yet, it's likely that you will: a group of Hollywood producers wants to make it into a movie. A 1972 British flick that featured Liv Ullman (made in the 60's, but not shown until 1972) was apparently a complete dud.
Several versions of the Pope Joan fable and items about the recent resurgence of interest in it can be found at Internet sites listed below.
Encyclopedia Britannica article on Pope Joan: http://www.britannica.com/bcom/eb/article/7/0,5716,44687+1+43692,00.html
Fawcett Library (London Guildhall University) item: http://www.lgu.ac.uk/fawcett/fawfaq.htm#9
Catholic Encyclopedia: http://www.newadvent.org/cathen/08407a.htm
US News Online: http://www.usnews.com:80/usnews/issue/000724/mysteries/pope.htm
A favorable review of the Cross Book: http://www.echonyc.com/~onissues/f97PopeJoan.html
The Cross book publicity web site: http://www.popejoan.com/
A favorable review of another recent Pope Joan book: http://www.bostonphoenix.com/archive/books/99/03/25/bookmarks/PETER_STANFORD.html
The "Pope Joan" card and board game: