Means:
1) To pwn somebody so terribly that they must hide their face in everlasting shame.
2) In the game Super Smash Brothers Melee, it is the slang term for Mr. Game and Watch's Down B attack which excretes oil upon another character's face/body.
1) Damn, he just got splooged by that guy in counterstrike.
2) Wow, his Mr. Game and Watch just totally splooged you into defeat.