Warren Teitelman originally wrote DWIM to fix his typos and spelling errors, so it was somewhat idiosyncratic to his style, and would often make hash of anyone else's typos if they were stylistically different. Some victims of DWIM thus claimed that the acronym stood for "Damn Warren's Infernal Machine!'.
In one notorious incident, Warren added a DWIM feature to the command interpreter used at Xerox PARC. One day another hacker there typed "delete *$" to free up some disk space. (The editor there named backup files by appending "$" to the original file name, so he was trying to delete any backup files left over from old editing sessions.) It happened that there weren't any editor backup files, so DWIM helpfully reported "*$ not found, assuming you meant 'delete *'". It then started to delete all the files on the disk! The hacker managed to stop it with a Vulcan nerve pinch after only a half dozen or so files were lost.
DWIM is often suggested in jest as a desired feature for a complex program; it is also occasionally described as the single instruction the ideal computer would have. Back when proofs of program correctness were in vogue, there were also jokes about "DWIMC" (Do What I Mean, Correctly). A related term, more often seen as a verb, is DTRT (Do The Right Thing); see Right Thing.