The War of the Worlds panic is a myth, unfortunately.

From Slate.com "How did the story of panicked listeners begin? Blame America’s newspapers. Radio had siphoned off advertising revenue from print during the Depression, badly damaging the newspaper industry. So the papers seized the opportunity presented by Welles’ program to discredit radio as a source of news. The newspaper industry sensationalized the panic to prove to advertisers, and regulators, that radio management was irresponsible and not to be trusted. In an editorial titled “Terror by Radio,” the New York Times reproached “radio officials” for approving the interweaving of “blood-curdling fiction” with news flashes “offered in exactly the manner that real news would have been given.” Warned Editor and Publisher, the newspaper industry’s trade journal, “The nation as a whole continues to face the danger of incomplete, misunderstood news over a medium which has yet to prove ... that it is competent to perform the news job.”

The BBC "The panic and terror so routinely associated with The War of the Worlds dramatisation did not come close to a nationwide dimension that night 73 years ago. Sure, some Americans were frightened or disturbed by what they heard. But most listeners, overwhelmingly, were not. They recognised it for what it was - a clever and entertaining radio play."

Those were two different "Wells." H.G. was the author, Orson Welles (note the "e"--he was no relation) was the director and narrator of the radio show. Some people, those who'd read the book, which wasn't even close to everyone, did recognize they were listening to a fictitious drama. In fact, there were on-air warnings. But the program was so realistic and so well done that many people, particularly those who weren't paying close attention at first, or those who'd never heard of the book, were convinced it was the real thing. By the way, if you want to hear the program, it's on Youtube. https://www.youtube.com/watch?v=Xs0K4ApWl4g

Do remember that it was quite extensively re-written and then presented in the form of a breaking news story.

In 1938 there was no TV, the radio and newspapers were really the only source of information. People trusted what they heard on the radio.

At the start of the broadcast Wells announced that it was a radio play and was not an real news report, however there was another popular show on a different station that overlapped with the start of the Wells broadcast, so many listeners didn't hear the warning.

So the play started and it sounded pretty genuine - it starts with a 'normal' radio play that is interrupted by an urgent news report, and goes from there.

It sounds very genuine and the public trusted the radio. In general people were much less skeptical than they are today, that together with people missing the warning and the story being re-written made it all quite real.

Its unclear exactly how much panic there was, its pretty much accepted that it was over hyped in contemporary reports but it is quite hard to judge just exactly how widespread it was and how scared people got.

You can listen to the original broadcast here: http://www.mercurytheatre.info/

A bit more information here : http://history1900s.about.com/od/1930s/a/warofworlds.htm