This word is most appropriately used when someone is proven wrong in an embarassing manner. It is not simply a matter of making a mistake, or being embarassed, but is most properly used when someone has vehemently defended a position and been proven wrong.
It is also most appropriately used during a battle of insults when someone offers a better retort to someone's innitial attack.
Person 1 - Asians suck at football. There has never been a good asian football player
Person 2 - What about Jr. Seau!?
Person 1 - Jr. Seau is polynesian, not asian, you dumbass
Third Party - Ohh! You got moded!
Person 1 - You're too ugly to get any girls you fat ass!
Person 2 - That's why I fucked your girlfriend last night!
Third Party - Ohhhh! You got MODED!
D it up is most commonly understood as playing very good defense.
"Come on fellas, if we hold them here we'll win the game. It's time to D it up!"