A "prison pussy" is a configuration of facial hair which surrounds a man's mouth (also known as a "goatee"). This ironic term is intended to insult a man who thinks his well-trimmed facial hair makes him look tough. The overt implication of the term is that men in prison would use his mouth like a vagina. This insult is especially powerful when it is spoken by a woman.
Do you know that guy John? He's a white guy, about 6 feet tall, with a prison pussy.