It means that the target is in a bad mood or in unnecessary distress, and you are implying this with the notion of them having a stick in their anal cavity, which, of course, is very painful and would definately cause a rather pissy mood. It's a way of telling them to STFU. However, this phrase is not recommended around people who constantly make Yo Mama jokes. A similar thing to say would be telling them this with the Sandy Vagina phrase.
Guy 1: Dude, I have so much damn homework I'm gonna tear someone's freakin eyes out! Aaarrgh! *throws nearby freshman out a window*
Guy 2: Dude pull the stick out of your ass!
Guy 2: Dude pull the stick out of your ass!
by FunnyLolMan June 29, 2009