"My Little Pony: Friendship is Magic" airs alongside several other cartoons with Hasbro tie-ins. One of these shows is "The Pound Puppies," a series about a secret club made up of dogs. At the end of many MLP:FiM broadcasts, an ad for "Pound Puppies" comes up. At one point, a gray dog named Niblet is speaking about how their club is "Secret, but fun!" However, the pronunciation of the sentence can be misinterpreted as him saying "Secret Butt Fun!"
The phrase caught on in both Youtube comments and on Synchtube, a website where bronies watch Youtube videos while chatting. Observant bronies noticed the hilariously misunderstood ad at the very end of MLP:FiM episodes. Many of these Youtube episodes did not cut out the credits, leaving the "Secret Butt Fun" ad up for all to see.
The phrase rocketed into Ponychan when "A Dog and Pony Show" aired. This episode focused around Diamond Dogs, who captured Rarity and forced her to find jems. If the likeness in species wasn't enough, at one point, the lead Diamond Dog slaps Rarity on the behind, yelling "Hiyah, Mule!" To add flames to the fire, the original broadcast of "A Dog And Pony Show" had the Pound Puppies ad at the end.
After this, the phrase gained popularity steadily on Ponychan, and is now playfully used to refer to any form of discreet sex (mostly anal), consensual or not. The dog is sometimes used as a Pedobear or Molestia type character.