When a man approaches someone who's asleep, whips his cock
out of his pants and dangles it next to the victims face. He then gently brushes the lips or face of the victim with his finger, but upon waking the victim sees nothing but cock
and believes it rubbed on him/her.
Since Jerry's dad was the first to pass out at the New Year's party, Jerry gave him the "liptrick" to the delight of the crowd.