From our friends at HowToGrowMarijuana.com:
Bud rot, AKA grey mold, is properly known as Botrytis cinerea and is a fast spreading necrotic fungis that can destroy a whole cannabis garden in just a matter of days. Most commonly bud rot affects plants during the flowering phase when kolas get big and fat and damp. The first sign is often when a small leaf sticking out from the kola begins to wither and die. A small, localized clump of mold will quickly appear at this site and this can very quickly infect the whole plant. Left untreated bud rot will turn all your flowers to slime.
The best way to treat bud rot is prevention. Try to ensure that your growing area is well ventilated with good air circulation. Some people like to spray their plants with an organic fungicide as a matter of course, whereas other seek to avoid this. If you do spray, only do so before the flowers have began to form. Smoking fungicide is dangerous and to be avoided at all costs.
If you find bud rot on one of your plants you need to act immediately. Carefully remove the affected section of bud from at least an inch below the mold with a pair of sterilized scissors. Be very gentle with it, shaking it about will spread the millions of spores to other parts of the plant.
Place the infected material in a plastic bag and remove it from the site completely. You will now need to check your plants daily, looking carefully for further signs of mold. Try bending the kolas so that you can see the stem underneath. This is where the bud rot starts. If you see any signs of mold remove the affected part of the plant immediately.
Because bud rot tends to affect plants during the later part of the flowering period it is sometimes worth cropping the plant early to avoid further contamination. If you only have a week or so to go before your planned harvest date you might want to consider this.