Penis. Probably derived from the German "schlange" for snake, which, pronounced in German, must have sounded like "schlong" to native English speakers.
1)Commonly used as a term to describe someone with a large penis, similliar to that of a horse.
2) A hot-dog shop in New York (my friend got a t-shirt from there, it has a picture of a hot dog and says "Schlongs Hot-dogs. If it isnt 12 inches it is'nt a Schlong")
Example 1)
Person 1: "Smeagle! put that Schlong away brother!"