OK, so this is a common enough topic that it warrants a through treatment, in part because, on a level its harmless enough. This thread is locked because there's no need for a scholarly debate on this.
So, according to Wikipedia, which references other websites, the recipe is: Coat a paper with glue, presumably starch based, making it rough and thick. Then paint it with iodine tincture. It will turn black and opaque. Any weak oxidizer will turn it clear, a weak Vitamin C solution, even inside of a Kool-Aide type drink. So the black color is gone. Anyone who wants to play like this, passing secret notes, or impressing small children with their chemistry knowledge, go right ahead. And feel free to start a new topic for the details.
OMFG, Arkcon just gave the formula for a scam. So what, the news will mention it again and again. The scam is done to one bill, the briefcase or car trunk full of similar papers isn't real currency. If it were, so what, the scammers would just club you over the head as soon as your back was turned. The confidence game has a thousand variants, most of which don't involve chemistry at all.
So really, when another clueless person arrives with the same question, it can just get tacked onto this thread.