It means "Designated Ugly Fat
Friend". They don't have to be any of those, but that doesn't
mean they don't have friends more attractive than them. The DUFF is basically the least attractive
one in the group.
"She's cute, but her friends are hotter. She must be the DUFF."
"He's the youngest in the
team and acts as the Gatekeeper to the rest of the team. He's a DUFF."
"That
teacher is being left out from other conversations... He's a
teacher DUFF."