When something doesn't come out right or fucks you over.
The term was coined by a really really ridiculously good looking guy in 2006 when he realized the music he had burned on a blank CD was indeed a bad burn. He took it out, opened the sunroof and chucked the cd out of the car while saying bad burn man!
chucko: i got drunk last night and i totally blacked out...
reggie: bad burn
reggie: The trojans got owned by UCLA
chucko: bad burn!
chucko: i totally dropped alcohol on my laptop
reggie: really bad burn!!
Jennifer was dancing and being hammered when she dropped her drink on the dance floor in Vegas. she exclaimed BAAAAD BURN.... upon inspection she realizes she got other people wet with red bull vodka and proceeded to yell "reeeeeally bad burn"