The original theory said that humans evolved from a form of "aquatic ape". It said that humans have more features of aquatic mammals than our ape ancestors. The theory hypothesised that some form of ancient ape returned to life in the water, and, eventually, lost its hair, developed a different breathing method, and other changes that eventually turned the ape into the creature known as Homo sapiens, or at least something like it. These aquatic humans soon returned to life on the land, becoming modern man.
But what does this have to do with cryptozoology?
Well, a number of things. The first is an idea popularized by said mermaid mockumentary. The idea says that a form of ape may have returned to the water, but, unlike those that would soon become humans, some of these "aquatic apes" became perfectly suited for oceanic life, growing fins, fusing legs that soon resemble tails, etc. Essentially, mermaids.
The other connection is a theory popular among certain cryptozoologists. Aquatic, bipedal reptiles like the Loveland Frogmen or Kappas are all but unexplainable. This branch off the aquatic ape theory says that these creatures are really a form of aquatic or semi-aquatic monkey or ape.