Actually it simply expands to .., so rm -rf .* happily deletes ../, therefore ./, etc. If you're in /tmp at the time you're making this mistake, it will clobber /. Current GNU rm may be more careful, though, and warn you of unintended consequences.
I'm not sure but my persona horror story on OS X was when I typed mkdir ~ then tried to delete my new folder. Needless to say, I'm now paranoid about backups ;-)
> .* expands to ../*
Not on my box it doesn't. Was this true in some (rather cruel) past?