Used when something unfornuate but not tragic occurs. Like when your dog scarfs up your dinner while you go to answer the phone. Similar usage to "Ah, shit!".
You are leaving your favorite local ice cream shop on a sultry July afternoon when someone bumps into you and your double decker scoop of cookie dough plops onto your sparkling white tee shirt..."Sweet crap in a basket!"
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.