Phrase used to describe something which is not heterosexual, it would literally be applied toward homosexuality. It is, however, more often applied pejoratively to negative situations, being used in place of gay when saying that something is lame or stupid.
Dude, you ate all of my donuts? That is so not hetero.
Seriously, guys, you need to stop talking about how often you watch America's Next Top Model. It's not hetero.
When Jess and Steve sit together on the bench with their arms around each other, I want to say it's seriously not hetero, but I know they're straight.