1.Someone who does not have the mental capacity to perform normal human functions. Basically this person can be described as a retard.
2.Someone who is an asshole to everyone, and nobody likes them. Most people would just call them a "dueche"; however, this person is usually short in nature, hence the "nugget" part.
1. "Stop being a dueche nugget James and lets get going, you are always late!"
2. "James is being an ass, he's such a dueche nugget"
A take-off from the modern meaning of the term "douchebag." "Douche nugget" is used to describe someone who is arrogant, self-centered, rude, obnoxious, etc, and this person is not well-liked due to these characteristics. Someone who acts like a douche nugget also possesses a low level of intelligence.
Emily: He's been acting weird for the past week or so...
Amanda: What a douche nugget.