Friends that have seen each others penises on more than one occasion, and thus their friendship has gotten stronger. Once you’re penis friends with someone, nothing you do together involving the penis is considered gay.
Kentucky Fried Penis is when the woman gets a man to agree to have sex with her to get the man's penis to fuck it to try and make it turn into a hotdog or smoked sausage.
A guy who is only kept around for sexual purposes, with no serious romantic or emotional connection. Unlike a friend with benefits, a penisfriend's only function is to respond to bootycalls--an actual friendship does not not exist (but one may develop as a side effect).
A dildo with its own life.
My roommate's trying to take it slow with this new guy she really likes, so she's got a penisfriend on the side to vent all of her sexual frustration.