This is a term that refers to a person who has been insulted. It is kind of like saying salted, treated, or burned. It is also accompanied with a swift movement of the hand resembling the jerking off motion.
Yo mama's so dumb when she heard it was chilly out, she ran outside with a bowl! Jerk sauced!!
You're so ugly, when you were born they put tinted windows on your incubator OHHH JERK SAUCE IN YO FACE!!!
You're so ugly, you went to a haunted house and came out with an application! OHH you got JERK SAUCE in yo eye!!