DMDM hydantoin is a preservative that helps create a moist environment, which can help bacteria stay around. Safety tests on the chemical show it falls in the low toxicity category when applied to the skin, but long-term exposure may cause allergic reactions or other unintended effects.
DMDM hydantoin is mainly used as an “unofficial” preservative for oily hair products because its efficacy under hermetic conditions has not been properly assessed yet. It’s usually found in shampoos and conditioners with additives that give them extra fragrance like stearyl alcohol, propylene glycol, etc…