In an article titled "Fossils: myths, mystery and magic" Steve Connor explores the history of fossils, their discoveries throughout history, and some of the myths which unfolded from early discoveries of strange looking fossils. Some of the stories show quite clearly how certain stories may have been propagated, and most I'd never actually heard of. For instance:

Fossil trees and giant serpents

The fossil Lepidodendron is an extinct genus of a tree-like plant related to club mosses. They could sometimes grow to heights of 30 metres and have trunks a metre thick, and thrived during the Carboniferous period (360 to 300 million years ago).

Lepidodendrons had tall, thick trunks that rarely branched and were topped with a crown of branches bearing leaves. The leaf scars on their trunks and stems looked like tyre tracks or alligator skin.

The folklore Lepidodendrons' rotted and compacted remains formed the coal seams exploited in Britain. After their leaves had fallen off, their trunks became covered with diamond-shaped scars, which resembled the scales of a reptile. As late as 1851 a specimen of this fossil tree was exhibited in Neath as a gigantic fossilised serpent. Visitors could view the 8ft-long specimen for the sum of one shilling (tradesmen six pence and working classes three pence).

Lepidodendrons are now known as scale trees.

I can imagine that fossil would look quite strange to an uneducated observer!