On the farm, when a cow is taking a shit and, in the process, Coughs causing an explosion of shit to hurl from its ass at light speed. Most often a witness to this even will tend to use the phrase to describe the speed of an object or vehicle.
It is said of the situation where a person has the bad luck to make contact with his testicles against an undefined surface or object, intentioned or not.
Given the nature of the word, it is more appropriate to design cases where the interaction is made with a moving object, for example, a ball.
Although it is extremely painful for the victim, it tends to be considerably funny to people who witness it.
Today in the baseball game the pitcher took a nutshot; the baseball hit him in the nuts.
Man, I just watched the funniest nutshot video ever.