It's like chillin, but more extreme. Derives from the noun "rug" and describes the act of laying around a house, pad, and/or crib, draped over couches and sprawled out on the floor - like a rug.
-hey man, you want to chill?
-nah dude, i don't have energy for that. let's rug it.
-hey dawg, what're you up to?
-just ruggin' it, man