Last I heard, this was generally ascribed to carpet fiber or clothes fiber and/or Delusional Parasitosis. Some have raised the possibility of Agrobacterium.
http://en.wikipedia.org/wiki/Morgellon%27s
But the CDC is investigating. Something else we'll learn more about in 2008, sounds like.
Centers for Disease Control and Prevention (CDC) task force first met in June 2006.[18] As of August, the task force consisted of 12 people, including two pathologists, a toxicologist, an ethicist, a mental health expert and specialists in infectious, parasitic, environmental and chronic diseases.[19] In July of 2006, Dan Rutz, MPH, a communications specialist for the CDC, said "We're not ready to concede there's a new disease, but the volume of concern has stepped up because a lot of people are writing or calling their congressmen about it."[20] In May, 2007, KGW-TV Newschannel 8's Laural Porter asked Rutz "Do you have any idea what the fibers are?" Rutz said, "None. We don't know. We haven't studied them in a lab yet. There is nothing to imply there is [an infectious process], but our mind is open to everything, including that remote possibility."
In June 2007, the CDC opened a website on "Unexplained Dermopathy (aka "Morgellons")", stating, "CDC is working with public health and other medical professionals to identify potential sites for the epidemiologic investigation. CDC also is working with task force members to develop a scientific protocol, including an initial screening case definition for the epidemiologic investigation."[1] On July 31, 2007, the CDC issued a formal Request for Quotations for an epidemiologic investigation of Morgellons, with a view to establishing whether it is in fact a distinct condition. The CDC plans to identify a database of potential cases (study cohort) by November 30, 2007.[21]
On November 1, 2007, the CDC updated their website with information about the investigation process, stating that "The primary goals of the investigation are to better describe the clinical and epidemiologic features of this condition and to generate hypotheses about possible risk factors."[5] They state that Kaiser Permanente in Northern California was chosen to assist with investigation, which will begin when the scientific protocols and review board structure have been prepared and approved. A description of the geographic distribution of the illness and estimated rates of illness in the community will be developed. The investigation will involve skin biopsies from affected patients, and characterization of foreign material such as fibers or threads obtained from patients to determine their potential source.[5][22]
This is some pretty freaky stuff here, and i`ve seen some sites blame this on nanotech... don`t know if they have proof of that thou it could be a result of a lot of things at this point...