When a request or problem is described, this phrase is used to tell the person that what they need or are requesting is simply not possible/available and probably won't be in the near future. An "urban" variation of "out of luck".
Jill: I'd like to borrow your bike so that I can go down to the grocery store.
Jack: Sorry Jane, its got a flat, you're shit out of luck.
This is a variation on the more time honored "shit out of luck". It is an even more adamant reference to the fact that the person being addressed is in a bad position with no obvious or readily available resolution. The phrase also has a very succinct internal rhyme and is therefore preferred by the more poetic users of 'colorful metaphors'.
Jill: Can I borrow your bike to go down to the grocery store? I need to get some feminine products RIGHT NOW!
Jack: Sorry, my bike was abducted by aliens, you're fuck out of luck!