This term is used to describe people or situations that catch you completely off guard in a negative way. It is so out of touch with reality that there is no better word to describe it. The reasons for a Kaww situation to happen are so insanely stupid that its hard to express.
1st speaker: Yo, that chick was soo kaww the other day. She didnt want me to drop her home, so we posted up at an empty lot, and she didnt even talk or put out.
2nd Speaker: Watt a kaww hoe!