Gauchito Gil was a real Argentine who lived long ago. Basically, he fell in love with a woman whom the police chief was also in love with, and the chief and the woman's brothers tried to kill Gil. He joined the army to escape and returned home a hero. Forced to fight in the civil war, however, he deserted, tired of fighting. The chief found him and hung him from a tree and killed him. Before Gil died, he told the policeman that the policeman's son was very sick and would only get better if the policeman prayed to Gil. The son was in fact sick, and the policeman, after a few days, prayed to Gil. The son promptly got better and the policeman gave Gil a proper burial and spread the word.
That's essentially how the legend goes. You see these all over - in town, along the highway, everywhere. People are even hoping to get him declared a saint.
The full legend can be found on Wikipedia.
Oh, and Gauchito means 'little gaucho'. A gaucho is an Argentine cowboy.