According to the dictionary, hypoallergenic means "little likelihood of causing an allergic response," but try telling that to someone with super-sensitive skin. Just because this chance is lessened provides no guarantees and, upon further digging, there's evidence that this word has been misleading consumers for decades.
It seems the term was first used in a cosmetics campaign in 1953 to claim one product was gentler and safer than its competitors. In 1975, the FDA issued a regulation that "hypoallergenic" could only be used if scientific studies on human subjects showed that it caused a significantly lower rate of adverse skin reactions than similar products not making such claims. The manufacturers were responsible for testing (but not held accountable) and, in no time at all, not only was that regulation declared invalid in court, the term permeated the entire industry . . . and it still does today.
The bottom line: There may be a small bit of truth to this, but it comes with a hefty chunk of marketing razzle-dazzle. I don't know about you, but I'm gonna keep spot-testing on my sensitive skin and scalp to take no chances.