This phrase is an odd variation from the regularly used phrase "that sucks". There are
two main definitions of this:
1) in literal terms, putting your mouth to an
anus and quickly inhaling, causing a stream of
air to be pulled into your mouth from the
anus.
2) in slang terms, to be bad. This is how the phrase is most commonly used, and tends to be more intense than the usual "that sucks." "That sucks ass" is like adding a "really" to it.