1. To land on the ground face first, and thus appear to "eat dirt", from slipping/skateboarding/rollerskating etc. Getting dirt in one's mouth from falling face first.
2. An insult - suggesting that the other person is not good enough for food, and should eat dirt. Related to eat shit.
"What a fall, that poor guy totally ate dirt!"
"I have an idea, why don't you just go eat dirt?!"
when being verbally attacked you say eat dirt to offend the other person. once you say those two magical words people will back down cause they know you mean business.
jessica: wow you're an idiot.
maggie: eat dirt!