A phrase used when committing a potentially homosexual act, as to assure your straightness to your group of friends.
If you must come in close proximity and/or physically touch another male in a homosexual way, "no fag" can be called to straighten the following action.
(Your drink is on the opposite side of the guy sitting next to you)
You: No fag (Reach across his lap to grab your drink)
Other guy: Good thing you called "no fag," cause I would have kicked your ass.
When two guys stumble upon a horny, drunk girl, 'no fag' may be used to justify a heterosexual threesome.