When you have sex with only your pants off. Often typical during high school years when parents are upstairs and you don't want to get caught.
Also translates to the widely accepted term of "doing things half way" or "not 100%." The sexual context is the original form of "half-assed'
We were freakin it in her basement, and her parents came down. Good thing we were half-assed, otherwise we would have been caught.