2. Bad, a ruder version of "down in the dumps"
Argh, Mellanie dumped me, and now I'm feeling the shits from losing her...
Peter: Hey Micheal, the shits sent us another frisbee in the mail today!
Micheal: Great! Let's go play with it in the garden, then add it to our other two thousand free discus! Thanks AOL!
Evolved to common usage for any item of high quality. However, in typical usage, the article "the" is required to denote superiority. Without the word "the" prefacing the word "shit," a different, usually negative, meaning applies.
His new car is the shit./His car is excellent.
This joint is shit./This is poor quality marijuana.
His new car is shit./His new car is not desirable.