It is an exclamation used to describe an act that is astounding beyond words. So you say- WHAT THE FLAGNOG?!?!? (It has also been used as a varition of WTH or WTF.)
This word is destined to sweep the universe. If you don't like it, we don't care, so FLAGNOG it!!
If you are sleeping in history class and all of a sudden you feel your eye getting slapped, you sit up and yell "WHAT THE FLAGNOG?!?"
Got it? Good.