I've never heard of it before today.
However, I did decide to research it myself. What I found is the story originated from CNS, a right-wing "news" outlet, in May 2009. In the original article, they actually stated the grant was issued November 5, 2008.... which is during President George W. Bush's term, not Obama's.
Right after the CNS article was posted, the site Newsbusters changed the story and falsely blamed Obama for approving the grant by omitting the date the grant was issued (during Bush's term), and claimed that Obama himself approved the funding. From there, it spread to other right-wing blog sites, and eventually made it's way to Fox News and was reported by Bret Baier and Glenn Beck, both of who never mentioned the grant was issued during Bush's term in November 2008.
Lastly, I found out the actual grant information directly from Wayne State University, where the grant was given. It is actually for an alcohol and HIV intervention center established in south China, with the purpose of studying the link between alcohol and HIV among prostitutes in China: Prognosis E-News
Now the merits of this funding and the project can always be questioned. No doubt. The issue here is the lack of information that was originally presented by Binder, as well as how the story has been twisted around a bit. It's been twisted to the point that Binder in his very first post even blamed Obama and stated that it's the type of spending he has "refused to cut".
So now that we have more of the facts and the actual story, feel free to discuss. Here, I'll start: yes, I do think it's wasteful spending. I don't see a valid link between Chinese prostitutes and U.S. interests that warrant a $2.6 million grant. Short, simple, and to the point.
That being said, we do already spend millions of dollars a year all over the world, using taxpayer money, to fight against HIV and AIDS. So in reality, this isn't much different. Mainly it's a difference in application rather than principle.