The word used in an ongoing drinking game in close-knit drinking circles when a poor fool has his beer/alcoholic beverage in his/her dominant hand.
When the word is yelled in an accusing way at this fool, they have to drink(or chug) whatever amount of alcohol is in the container of their dominant hand.
Not recommended for inexperienced drinkers.
Guy 1: "Dude, Steve got so trashed last night, he couldn't even see!"
Guy 2: "I know man, I waterbuffalo'd him four times in an hour!"
(high fives)
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.