Answer: False, it's a myth that erroneously has been passed down for generations, and continues to be taught today.
Edit - I have reviewed the sources presented by our players in support of both the "True" and "False" sides.
In my opinion, the arguments on the "False" side are decidedly more convincing.
That said, it has been my practice in scoring these questions to give credit for answers that differ from the official correct answer, as long somebody presents a source that supports the alternate answer, as long as I agree that the source does, in fact, support the answer. The source submitted by Faraway Friend supports an answer of "True." And as Allie pointed out, there are other sources, even whole books, that support the answer of True.
So, everybody who answered this question is going to get 10 points.
But please, don't go around telling people that the assistant host of the trivia game at civilwartalk.com says it's true that quilts were used to give signals for the Underground Railroad.
Hoosier