1970s/80s: You are about to lie or make an excuse.

mid90s onwards: You are in bit of a soup and you have a semi-valid excuse. So you just say "funny story" and its understood that you are not going to hold your end of the bargain.
Friend1: Did I see you driving my car yesterday ?
Friend2: Funny story... I was looking for _my_ car keys and ...

Manager: How are we placed on the back order from Big Company ?
You: Funny Story.
by alwarming July 5, 2011
The way you begin your story when you are about to lie to your friend or make an excuse.
Example1:

Christian: So Philip told me that he saw you watch a movie with my sister last Friday night.

DJ: Haha, Funny Story Bro....

Example2:

Jordan: So I heard you slept over my girlfriend's house last Friday night.

DJ: Haha, Funny Story Bro...
by DJ Imperial February 15, 2011
Something you say when you know your screwed, and your thinking of a way around it.
Jim - "Dude, why are you driving my car?"

Dave - "Its a funny story really-"

Jim - "Shut the fuck up and get out of my car."

Dave "Ok...."
by ReallyQuick June 13, 2010