Most often used in the gaming community as a victory move. After you kill an opponent you highly dislike it is not uncommon to stand over your enemies lifeless body and crouch up and down over and over in a T-bagging manner while the opponent watches from the kill cam his body being defiled. (Note: Although uncommon T-Bagging a player while in a laying position such as sniping can also be done and is extra funny for the kill cam review.) Note that T-Bagging can get you spawn killed or verbally assaulted over the microphone.
"Did you see that asshole? He just T-Bagged my body! Everyone spawn kill him!"
1. pwning a noob
2. standing over his lifeless body
3. and crouching many times over his head in the ultimate show of disrespect.
GUY 2: "what?"
GUY 1: "in Halo, I pwned a n00b, and t-bagged him!"
GUY 2: "OUCH! t-bagging can kill a mans pride!"