Literally, cagado (kah • GAH • though) means "shat", "shitted", "shit", or whatever past participle you choose for the verb "to shit". In Mexican slang something cagado if it is very funny. It is an informal expression but it is not offensive, and has absolutely nothing to do with feces. Use it confidently.
The video of the little boy dancing quebradita (a dance characterized by small, frequent jumps) is a good example of something cagado.