Why do people say the dagger is in Macbeth's head?

When you say 'the dagger is in Macbeth's head' it sounds as if he has a knife stuck in his head at some point in the play. It would be better to ask why the dagger is said to be imaginary - well, because Macbeth says it is, quite clearly "a dagger of the mind".

Banquo is shown taking off his sword, and giving it and something else to Fleance as well, "that" which might be anything (his cloak, pair of gloves, whatever) but almost certainly is not a knife, because he'd keep that with him. Even if he had given Fleance his knife too, why would Macbeth see it later floating in the air in front of him?

The dagger people refer to is the one mentioned in Act 2, Scene 1, in his soliloquy:

"Is this a dagger which I see before me,

The handle toward my hand? Come, let me clutch thee.

I have thee not, and yet I see thee still.

Art thou not, fatal vision, sensible

To feeling as to sight? or art thou but

A dagger of the mind, a false creation,

Proceeding from the heat-oppressed brain?

I see thee yet, in form as palpable

As this which now I draw.

Thou marshall’st me the way that I was going;

And such an instrument I was to use.

Mine eyes are made the fools o’ the other senses,

Or else worth all the rest; I see thee still,

And on thy blade and dudgeon gouts of blood,

Which was not so before. There’s no such thing:"