I think wikipedia http://en.wikipedia.org/wiki/Hobsons_choice explains it well:

"A Hobson's choice is a free choice in which only one option is offered. As a person may refuse to take that option, the choice is therefore between taking the option or not; "take it or leave it"."

The article goes on to discuss the incorrect use:

Hobson's choice is often misused to mean a false illusion of choice, but it is not a choice between two undesirable options, which is a Morton's Fork. Such a choice between two options of nearly equal value is more properly called a dilemma. Hobson's choice is one between something or nothing.