Used as an exclamation, particularly used by a third party to either emphasize some shit goin' down, or to make an awkward situation even more inappropriate.
This is not to be confused with other uses of the word "pussyshit" used as a noun.
Person 1: Shit Bromethius, we just sank it into triple overtime.
Bromethius: AWWW Pussyshit!
Person A: You wanna fucking go, dickshit?
Person B: I'm gonna rape your family!
Person C: AWWW Pussyshit!