From the Spanish word "Puto", which means faggot or gay. When it is used as "Masputo", it means something that is REALLY, REAllY gay. In his stand-up act, George Lopez: America's Mexican, he mentions puto as in being gay and masputo as an even gayer form of puto.
It is said of the situation where a person has the bad luck to make contact with his testicles against an undefined surface or object, intentioned or not.
Given the nature of the word, it is more appropriate to design cases where the interaction is made with a moving object, for example, a ball.
Although it is extremely painful for the victim, it tends to be considerably funny to people who witness it.
Today in the baseball game the pitcher took a nutshot; the baseball hit him in the nuts.
Man, I just watched the funniest nutshot video ever.