It's a D&D term where you tweak a skill of your character to the point of detriments in another skills, and the Dungeon Master specifically tailors the campaign to take advantage of that detriment, fully negating any point of pimping out the skill you were focused on. Thus, your character is skillfucked.
(Definition courtesy of MattK via www.ToplessRobot.com)
I'm sorry Brian, I guess you shouldn't have poured all your skill points in to bargain, since there are no merchants in this campaign. You my friend have been officially skillfucked.