https://web.archive.org/web/20070525044536/http://mtgox.com/...
(But actually MTGO has it's own de-facto virtual currency - tix - which are regularly traded for cards through the MTGO interface.
I think the confusion is that some people parse it incorrectly as "Magic: The Gathering" + "Online Exchange" rather than as "Magic: The Gathering Online" + "Exchange", so think that it was (planned to be) an exchange for physical rather than virtual cards.
It's just a placeholder text.
The problem is, it paid off. We've all been saying "Um, maybe doing major financial exchanges with an outfit so unprofessional that they do business under an initialism for 'Magic: The Gathering Online Exchange' isn't such a great idea." And now it turns out we were 100% right. So...there's no joke anymore. It's just historical fact now.