"True Hermaphroditism" is quite rare, and there isn't even full agreement as to what it consists of. Here's an interesting article on the type of developmental anomaly that can result in cases like this: http://en.wikipedia.org/wiki/Chimera_(genetics)

Basically, what happens is that pieces of two zygotes merge before reaching the embryo stage, and if the embryo survives and develops enough to reach birth (most serious genetic and developmental errors result in miscarriage), the resultant child carries tissue from two different genetic sources. If one is male and the other female, it's possible that sexual organs of both might be present, although usually one will be more developed than the other.

That kind of developmental anomaly is different from most intersex conditions. The more common type involves a fetus that develops from a single set of cells, and any one of a number of disorders that affect the normal fetal development of sexual organs from those cells. This can involve too many or too few sex chromosomes, or defects of specific genes (which may be on other chromosomes besides the sex ones) involving hormones or hormone receptors, and not necessarily even the ones for sex hormones. Human fetal development is quite complex and a lot of interrelated things have to work out correctly in the right order and the right timeframe to end up "normal." The acronym DSD, for Disorders of Sexual Development, is now the preferred term for these intersex conditions.

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