Like teabagging, the man is dipping his testicles into the mouth of either an unsuspecting (usually sleeping) victim or into the mouth of a partner for sexual gratification. The distintion between teabagging and potato sacking is that only a man with extremely large testicles can pull it off.
The opposite of a butterface or a girl you would put a paper bag over the face of before intercourse. Potato sacking is necessary with girls who have nice face but less then desirable bodies that need to be covered before oral sex, because head is head.