Dead Man's Sperm, a.k.a. Hanged Man's Sperm, is an ingredient believed to be used by witches in various nefarious black magic spells as well as was believed to be gathered by demons who used it to sire demonic offspring with mortal women.
According to some sources, one out of ever three hangings of men results in a condition called death erection, terminal erection, or "angel lust". Such terms basically refer to an erection of the penis, and subsequent release of semen, upon death. In older times when hanged men were allowed to either rot or were not removed for a lengthy period of time, the semen would drip down to the earth. There it was believed to be gathered by witches and demons. Additionally, the semen was believed to turn into a mandrake plant, a plant well-associated with magic and witchcraft.
To make matters confusing, sometimes the phrase "dead man's sperm" was a reference to the mandrake root used in witchcraft and not actually to the ejaculate from the hanged corpse. In this fashion the term "dead man's sperm" is a code word for the mandrake root.
As far as demons go, it was believed that incubi and other demons gathered the semen of hanged men and used it to impregnate human women whom they later seduced. This belief arose due to the common belief that demons could reproduce with humans but with the contradiction that demons were also supposed to be genderless.