When someone communicates something negative (true or not) about a certain individual to other people. This action could manifest as a text message, a verbal conversation, or an Urban Dictionary Definition.
Person 1: Did you hear about John Doe? I heard slept with Jane Doe and Janet Doe all in one night!
Person 2: What a fuckboy! Should we tell everyone?
Person 3: Nah, just do some shit-talking about him on Urban Dictionary . It'll work perfectly!
Person 1: Thanks, but I'll send out a group text.
When people (who either have no life, are jealous, or just completely pathetic) take part in the action of stating negative, rumored, or exaggerated stories about someone else in order to make themselves in turn feel better by making the other person look worse when in actuality the person being shit talked about is most likely a better person.
Ian said to Jacob "dude, Brit is applying to a historically black college so he can get a scholarship and start a future for himself by joining ROTC and becoming one of the brave men that defend our country, how f*cking lame" I.e. Ian is shit talking
Shit talking occurs when people have too much free time (see: not having a life) and make up rumors or put down others, whether they are enemies, friends, or just random people.
Those shit talking scumbags just wasted a whole five minutes of my life complaining about someone who I could really give a shit less about.