Used as an exclamation, particularly used by a third party to either emphasize some shit goin' down, or to make an awkward situation even more inappropriate.
This is not to be confused with other uses of the word "pussyshit" used as a noun.
Person 1: Shit Bromethius, we just sank it into triple overtime.
Bromethius: AWWW Pussyshit!
Person A: You wanna fucking go, dickshit?
Person B: I'm gonna rape your family!
Person C: AWWW Pussyshit!
The act of being a little snitch ass bitch, doing things a little bitch or a pussy would do.
Kid 1: "Yo dare me to sniff salt! Ill do it!"
Kid 2: "DO IT SON DO WORK"
Kid 1: "nah, it mite hurt"
Kid 2, and all his friends: "THATS FUCKIN PUSSYSHIT"