The rind of some citrus fruits contains essential oils, including a naturally-occurring chemical called d-limonene. More of it seems to occur in lemons, oranges and grapefruit than in limes. In extremely high concentrations, it is used in industrial cleaners and for paint stripping.

The physical effect of d-limonene acting as a solvent for polystyrene has long been observed, studied and reviewed by the plastics industry and by the US Food and Drug Administration (FDA). The phenomenon became a matter of public debate over 20 years ago, which was when the most-detailed studies were done. The FDA regards polystyrene foam beverage containers as very safe for human use.

When a wedge of lemon is cut or squeezed into a cup of liquid, limonene exudes to the surface of the liquid and eventually moves to the inside surface of the cup. At that point limonene will interact with the polystyrene, breaking down its cellular structure and actually entering into solution in the cup wall. Given enough time undisturbed and enough limonene, a hole can develop in a foam cup. Since it is a physical, not a chemical action, it is not at all like strong acids or bases burning a finger, or eating through paper. There is no danger to you if you drink from the cup; however, continuing the practice of leaving the rind in the cup for a long time is not recommended as the integrity of the cup breaks down and may no longer hold the hot liquid.