As coined by Adam Carolla, the LEATHER STATE refers to the condition of being half erect or the state between flaccid and having a boner. The reference is derived from the use of the term in ceramics crafting, as clay is generally referred to as being in the "leather phase" when it begins to harden and is difficult to work with.
Adam Carolla: "Did you see that girl? Man I'm starting to get some leather (leather state)."
Other 'Losers' in Ceramics Class: "Yeah that girl is definitely leather material"
Adam Carolla: "I did a couple of bumps of blow and got leather."