Colloquial German is not my strongest point, but since no one else has answered: Yes, it just means it's funny. Couldn't you just say something like 'Das ist ja zum Brüllen/Schreien'?
There's an expression 'to hoot with laughter' that just means to laugh loudly. That is, sort of in the direction of making funny noises through your nose while laughing a lot. Other animal-like verbs are also possible with laughter -- for instance, you can also snort with laughter, or maybe even bray or whinny with laughter if you're one of those people with a particularly annoying laugh.
However, just to say that something was a hoot isn't really that specific. It can just mean that it was fun (entertaining, enjoyable, macht Spaß), or funny (amusing, making you laugh, lustig, witzig), or both.
And 'zum Todlachen' might be a bit too strong. A hoot is funny, but not necessarily rolling-in-the-aisles gasping-for-breath clutching-your-sides funny. For that you would indeed say something like
nearly died laughing / died of laughter
couldn't stop laughing
laughed so hard I cried
laughed so hard it hurt
In my very scientific schema, I'd say a hoot is a shade or two less than that. (-;
Other similar expressions are 'a scream' (more emphatic) and 'a gas' (rather dated). Whether 'a hoot' is AE or even regional (southern US?), I have no idea.