1. The extreme and irrational fear of water. This is a symptom of rabies, a fatal viral disease transmitted through the saliva of infected animals. The word "hydrophobia" is often used to refer to rabies itself, even though it's just one symptom of the disease.
2. The property of repelling water. This is a more scientific term, used to describe materials that are resistant to water. For example, some fabrics are treated with hydrophobic coatings to make them water-resistant.
The context will usually make it clear which meaning of "hydrophobia" is intended.