A problem just got worse, or a problematic information just went public.
When somthing that was supposed to stey a secret became known to the worse people, or a problem you dreaded just manifested
A: John sent the email to his boss by mistake...
B: The Shit just hit the fan
A: The software update included the virus, it was sent to all the clients by now
B: The shit just hit the fan
Sometimes it's advantageous to ignore the problem, let it explode, and have other people deal with it. This policy is called "let the shit hit the fan".
A: Look, these numbers they gave us are really wrong.
B: I say, let the shit hit the fan and then they'll fix it.
When discovery of an inopportune incident, usually pertinent to personal misconduct, indiscretion, dereliction or impropriety is made, that provokes outrage toward and/or has seriously negative consequences for the perpetrator(s).
The shit hit the fan when her husband found out about her exorbitant expenditures.