It originates from the old Windows error screens. Despite Windows being in VGA graphics mode, when it took a dive the system would display a CGA-quality blue screen with DOS-script in white type. It rarely mattered what the screen said since it was often useless memory addresses and what not, but it nearly always meant something bad. Typically it meant your system "crashed", you lost any unsaved data, and had to (at least) reboot. So these screens were referred to as BSOD or Blue Screen of Death (Doom, Disaster, etc.).
Later versions of Windows would give you the BSOD in a shiney graphics mode, but it was still just as bad to see.
I could be wrong, but I think most VMK people are not having their systems crash with the above described BSOD, but rather are referring to a
Black Screen of Death when they talk about BSOD (as in their browser loads to a plain empty black screen that doesn't display VMK).
Yeah, I know TMI (Too Much Info), but I can't get into VMK and I'm bored.