It's when two people sit on the toilet and defecate together.
It's rare, even in places like Atherton where it's (by comparison) most common and almost everyone knows about it (but won't say anything). I'd guess that less than 5% of people in the VC-funded world, and virtually no one in the rest of the country, has done it. I do know one person in New York who got a job that way (but I don't know if he's still there.)
It's not necessarily a sex act-- many people who do it see it as a nonsexual emotional connection-- and it's not gendered (two men, two women, or a man and a woman can do it) but in the VC-land context, it's usually two heterosexual men forging a business connection. Most of the rising stars who do it don't even like it.
Many of the obviously unqualified VC darlings made their first contacts and got their intros via spider pooping, but it's not like it's a common thing.