To be out of order or reversed; very confused or mixed up; completely fouled up or wrong.
'Ass' refers to the rear end or buttocks, and 'backwards' means reversed. The phrase suggests that something is happening the wrong way, with the rear coming first. ('Ass' is an impolite word, so be careful using this phrase.)
Synonym: snafu
1) Jeb, you're riding that donkey ass backwards! Turn around!
2) You installed these windowsass backwards - the screens are supposed to be on the outside!
Beyond the phrase 'being backward'. It means lacking any insight, intelligence, correct action, respect to human rights, cultural sophistication, and most of all common sense.
Having a parked car on the lawn while drunk on a couch also on the lawn ass backwards.