Usually used by a person to show that they are not amused by another persons lame attempt at humor.
May also be used to exclaim your delight / amusement at seeing another person humiliated publicly.
May also be used in a shortened form such as "Skig", or as "skigging", "skiggin'", "past tense as "Skigged" or even as "skiggable". Other possible variants are "skigg-alicious" ;, "non-skiggable" etc.
Rob and Mike are outside messing around on skate boards. Mike states that he is going to attempt some sort of fancy maneuver on his board. The attempt fails - Mike falls to the ground and busts his ass. At this point Rob exclaims in a loud voice while pointing and smiling Ahhh Skiggy guh giggy! Mike is humiliated. Using the shortened form of "Ahhh Skigg!" would also have been appropriate.