A Hot Steam is a superstition describing a ghost who cannot get into Heaven that sucks people’s breath if they pass through.
When Dill comments that he can smell death and tell when people are going to die, Jim accepts it as another one of his attention-getting whoppers. He says that an old lady taught him how. Jem accuses him of believing in “Hot Steams,” but Dill does not know what they are, so Jem explains.
"A Hot Steam's somebody who can't get to heaven, just wallows around on lonesome roads an' if you walk through him, when you die you'll be one too, an' you'll go around at night suckin' people's breath-" (ch 4)
This is yet another example of a superstition the children have latched on to. They are young, and it is fun to talk about ghosts and scary things. Like the Radley House, they enjoy trying to push each other to the depths of courage.
Scout comments later that these are the things of childhood, and it is not long before they “vanished with our years as mist with sunrise” (ch 28). It is another sign of Scout’s growing maturity.