1. Used to describe potential failure in a given situation if a particular course of action is taken.
2. When you have done something exceptionally stupid causing you to have no progress toward resolution when attempting to solve a problem.
The concept being that it would be stupid, dangerous, and not to mention uncomfortable to step on your own dick. Furthermore, continued forward movement while stepping on one's own dick might cause additional harm to said member, while at the same time you are physically held back because as you proceed forward the forward movement is impeded by said foot on said dick.
1. "If we try to solve problem X by doing thing Y it'll be like we're stepping on our own dicks."
2. "I was sawing that 2 x 4 with that rusty ass hand saw you gave me and it was like I was stepping on my own dick. Where's the motherfucking circular saw?"
First heard by me in Ithaca, NY about 10 years ago.