It was derived from Valve's game "Team Fortress 2" in which the character, Sniper, uses a mason jar full of urine. The in-game name for it is "Jarate" and upon throwing said jar the character will yell "Jaaarate!"
Jarateed is also a word replacement for "pissed" on the Steam User Forums. The word filter will replace "Pissed" with "Jarateed". Clever reference on Valve's part.
See: Hammer Legion Member, Pissed off
Guy 2: "You mean Jarateed?"
Guy3: "Yeah, either way.