The urban definition of 'butter' is to have refined skills at a particular task, like playing basketball for example. To further understand the meaning of the word, you have to grasp a general idea of where the usage of it came from. Originally, people of all backgrounds used to say the phrase "I'm on a roll!" meaning that at the moment, they were so good at doing something, that there was no stopping them. Later on, people took the phrase to the next level by saying "I'm must be butter, 'cause I'm on a roll!" in the sense that, if you're on a roll, you have to butter, because that's what most people put on rolls. Later, this was just shortened to "Butter!"
(After draining a fourth straight three-pointer): I MUST be butter, 'cause I'm on a roll!
some other guy
: um, uh...yeah.