A complete fail of a comeback... basicaly... you would use it when you get verbally bitch slapped your face is all red... and you cannot come up with a comeback.
Faggot: You smell bad
Me: Wow... because you said that dis you went from nobody loving you... to having a small squirl start to love you... oh wait... that squirl just got ran over by a car... your back to nobody loving you...
Faggot: I know you are but what am I?
I was a kid in the 60's.. This phrase was not used by older sophisticated persons.. It was simply a juvenile response to juvenile name calling.. Some dumb kid would say: "You're Stupid" the simple and quick response would be "I know you are but what am I".. Sometimes (probably when first used) a good come back to one who was truly stupid, because it confounds them, confuses them.. "Uh uh uh, um, you're stupid?"
In actuallity, the phrase would go back and forth, several times.. "You're stupid", "I know you are but what am I" "You're dumb", "I know you are but what am I".. "What a jerk", "I know you are but what am I", "Jerk", "I know you are but what am I"...
Just a juvenile thing.. Used so often though (way back when) that til this day, I use the phrase in response to good compliments.. Most people my age, or close too, enjoy and laugh :)
Example: "You're cute" my response "I know you are but what am I" :)
A phrase used to signify that an argument has degraded to an immature level. Used as a response to someone that's turned a friendly discussion in to a personal argument.
Person 1: I hate iphones!
Person 2: I think they rawk. iPhones for everyone!
Person 1: You're a poo brain.
Person 2: I know you are but what am I?