There are two uses.
1. "prison" meant as a synonym for "extreme." origin: the graphic violence and man-on-man action in the HBO series "Oz," and any porno set in prison. Prison hot means extremely sexy, good, or appealing.
2. Sarcastic adjective used to describe something that some other pervert thinks is hot but is really disgusting, sick, or lame. (same origin)
1. ("extreme" use)
"That guy is prison hot!" or "That new 50 Cent cd is prison hot!"
2. (sarcastic use)
"I saw this great brazilian dog fuck video today, it was hot."
reply--"Yeah, that's prison hot."