An insult, referring to the child's toy "Sit 'n Spin", but used with a sexual connotation. The term tells a person to take a thumb (or another finger or object), stick it up their asshole, and spin on it. It's akin to saying "go fuck yourself."
The phrase can be used alone, or can be accompanied with a gesture. Holding your fist out in the "thumbs up" position, the speaker makes a short jab upwards, symbolizing sticking one's thumb up their ass.
John sprawled across the couch in the club, looking for some tail. A man walked up with a drink.
Man: "Hey, I was sitting there!"
John: "Well you're not now."
Man: "Yeah, but I want to sit there."
John stuck his thumb out and said "sit and spin."