On a long haired dog, cat, or sometimes, an unwashed co-worker, a combination of a loose bowel movement stuck in the hair around the butt. This mass has been sat upon, flattening it to a waffle-like appearance. In a co-worker, the presence of a butt waffle is indicated by a strong smell of "old shit".
"Hold still, you fucking cocksucker. If we don't get this butt waffle off yer ass, you'll have to stay outside for a week." (Generally screamed at a dog or cat, Not a co-worker.)