Herobrine

Herobrine is the subject of an old scare-story, where a person with the default skin, and completely white eyes appeared in singleplayer games.

He is actually a painting of the default skin with no eyes. This originates a long time ago, when a "creepy-pasta" was made about Herobrine.

The creator of the stream "Brocraft" who goes by the name "Copeeland", along with his friend, "Patimoose" staged the whole joke. Herobrine was then introduced in the Brocraft stream (at 20:45).

there was another video where herobrine was in the middle of Patimoose's lava field. Patimoose then went back up the stairs he went down. Saved and quit. He came back 10 minutes later, where there was another Brocraft stream. Patimoose then told his wife he was "trolling", which strengthened the fact that the Herobrine incidents were all staged

Most of the video consists of Patimoose getting reactions from everyone that was in chat. At the end of the video Patimoose fakes his game crashing.

After his game "crashed", all members then saw this page, featuring the default Minecraft face with real eyes in the place of the blocky eyes.

There are a couple theories on how they created this prank. One theory is that it was a reskined painting, while another theory is Patimoose and Copeeland changed the iron door texture.

Possible future update
Notch has posted on twitter about the subject of Herobrine.

Although this confirms that there is no Herobrine, it suggests that Notch may plan to add him as an entity in the near future, presumably acting in a similar way to the faked Herobrine.