When closeted gay men who desperately seek the attention and approval of others jokingly engage in sexual innuendos that would otherwise appear to make them homosexual but then claim that its "totally not gay" when it is in-fact completely, 100% gay.
Zephyr: Hey, why don't I pretend to perform fellatio on you.
Jono: Sure, cuz we're "straight" so its funny because we're totally not gay!
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.