

Strange but True
In Japan ghosts are believed to be unable to say the syllables 'mo' and 'shi'. When meeting somebody on an unlit road it became customary to call out the words 'Moshi moshi' to reassure the other person that you were alive - and challenge them to do the same.
Nowadays, Japanese people still answer the phone with 'Moshi-moshi'.
other stories: http://www.bbc.co.uk/dna/h2g2/A196760
The origin of "Moshi-moshi".
The origin of "Moshi-moshi" is "Mousu". "Mousu" is old Japanese of "moushi ageru"(It means "I say" in English). "Mousu" had corrupted into "Moshi". And old days, "Moshi" was used for speaking to someone.
Why do Japanese say "Moshi" twice, "Moshi-moshi"?
This is an old legend and may or may not be true.
Long ago, people believed they were in great danger of encountering mononoke (ghosts). When confronted with a stranger, there was no way to tell if it was a man or a ghost. Since they also believed that ghosts could not say the same word twice in a row, they said "Moshi-moshi." It was really a test phrase to see if the person was safe to talk to.
This came from a Japanese Reference website...kind of interesting:
http://www.jref.com/forum/showthread.php?t=9665