Generally used to refer to performances that border on unprofessional. The intended audience would have been similarly disappointed if the person had delivered the performance by speakerphone, in order to spend more time on leisurely pursuits.
Guy 2: It sucked.
Guy 1: Yeah, they really phoned it in on that one. They just kept killing people off and making up new characters.
Man 1: I phoned it in on work on friday. I basically did nothing all day but eat a sandwich.