When presented with a decision where there is no right answer or safe plan of action. Similar to being stuck between a rock and a hard place.
Example 1.
Buddy: "hum shitty poo, this fucking bus is never going to turn up is it. :( We could walk home in this lightning storm through the field of pylons? Or we could accept the lift from PychoSteve in his ice cream van?"
Example 2.
At the end of a long days boozing and perving Cunt-of-the-gang was equifucked. Tits or chips? he asked himself. To peruse one would result in the loss of the other.
The use of the word "blue" to refer to sexually explicit content was first recorded in Scotland in 1824. "Blue" meant "lewd" because prostitutes dressed in blue gowns.