It is said either by the person who insulted you, or a by stander who witnessed the insultation.
Can be used quite effectively with others in the "Ultimate Insult" group.
Donald: That's what ya mum said!
Ben: Oooooooh Burn!
Bryan: Oh burn
Jason: You're 28, uneducated, work at Wal-Mart, live with your mom, and you talk your balls just dropped. You aren't in any position to be "burning" anyone. Ever.