What does this sentence mean? How do I use it?
Butter my butt, call me a biscuit.
It is an expression of surprise. There are quite a few phrases like this associated with rural America. The point is describe something incredibly surprising or that you'd never have thought someone might actually do.
Some more good ones:
You might say something like this if you just learned something surprising, particularly if it's something contrary to what you previously believed. It implies that you were foolish in your previous belief, so it's a colorful way of saying "Call me a fool (or any other silly-sounding thing), I admit I was mistaken."
A similar one is "Shut my mouth."
As Hydrangea notes, it definitely is a rural American idiom.
Both the above are good. I would add that it sounds ironic - it is too blatantly "redneck" to be used as an exclaim of genuine suprise. It would be used ironically, for example, if something is very obvious.
Secondly, on useage, it should be only informally - it would be seen as unprofessional to use this in any other context than a casual one with peers of your own age that you have known for a long time.
The British (UK) equivalents might be - ironic, meaning that it very obvious: "No shit, Sherlock" i.e sarcastically you have the deductive abilities of Sherlock Holmes (meaning you do not, and rather, you are stating the obvious). A classic British equivalent of these "hick" Americana, would be the superbly understated: "Really?"
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