The variable hello is not defined. You were probably looking to set the innerHTML as a String:
function myFunction(div_id) {
    document.getElementById(div_id).innerHTML = "hello";
    // -----------------------------------------^-----^
}
DEMO: http://jsfiddle.net/uzuKp/1/
Even though you took an example from W3Schools and modified it, I'd suggest binding events separate from the HTML and storing associated data in data-* attributes. In your example, it can be as something like this:
<p>Click the button to trigger a function.</p>
<button data-div-id="demo1">Click me</button>
<button data-div-id="demo2">Click me</button>
<button data-div-id="demo1">Click me</button>
<div id="demo1">demo1</div>
<div id="demo2">demo2</div>
And the JS:
function clickHandler() {
    var targetDivId, targetDiv;
    targetDivId = this.getAttribute("data-div-id");
    targetDiv = document.getElementById(targetDivId);
    targetDiv.innerHTML = "Hello" + new Date().getTime();
}
function loadHandler() {
    var buttons, i, j, cur;
    buttons = document.getElementsByTagName("button");
    for (i = 0, j = buttons.length; i < j; i++) {
        cur = buttons[i];
        cur.onclick = clickHandler;
    }
}
window.onload = loadHandler;
DEMO: http://jsfiddle.net/3K4RD/
Although I would also suggest looking at the following article to see different ways to bind events: addEventListener vs onclick
One final suggestion I have is to not set the innerHTML property. You may have a simple example here, but it's usually a better idea to use DOM methods like appendChild (to add a node) and document.createTextNode (to create text that can be appended). Of course, that would require the contents to be cleared out first, something like:
while (targetDiv.firstChild) {
    targetDiv.removeChild(targetDiv.firstChild);
}
targetDiv.appendChild(document.createTextNode("Hello"));
DEMO: http://jsfiddle.net/52Kwe/
You could also store the specific string that needs to be set as the innerHTML as a data-* attribute (especially if it differs between buttons).
UPDATE:
Per your recent edit, the style property is a special property, which is actually a special object with style properties that you need to set. So for your example, you have to set the .style.display value, like:
document.getElementById(div_id).style.display = "none";