It is often used to describe "muging" of shoes while the subject is distracted. Originates from the word Mug - which relates to robbing, whether at gunpoint or not. The "M" was replaced with an "F" to stand for foot, or feet.
It is also often used to replace the F word in many cases, and can be used as cover up when around older people.
"Man he was fugged good!"
"Fugging piece of crap!"
"Why the fug did you do that?"
-- John Steinbeck, "Cannery Row" (1945)
The actress Tallulah Bankhead claimed she met Mailer at a party and said, "So, you're the guy who doesn't know how to spell fuck." (The story is sometimes told with Dorothy Parker as the speaker.) Mailer told an interviewer he never met Tallulah Bankhead, and in any case he knew how to spell four-letter words--the euphemism was used in order not to offend the sensibilities of readers in 1947.
EX.) Lets go smoke a fug.
EX.) Man: YO, you got a cigg.?
Man2: Naw, man we call them fugs now not ciggarettes...lol
I hope ya'll are gettn muh point right 'bout now if you ain't thats ya own dang fault...