"I'm gonna cut yo ass."
No - they aren't talking about farting. And they aren't actually planning to use a knife to cut any part of you. 'Cutting ass' is the vernacular used to describe making fun on someone. In my high school it was called 'cutting up,' which seemed entirely logical at the time. Likewise, this phrase is seldom questioned among my students.
My students don't make fun of people without giving them fair warning. If they are going to make fun of you they give you a chance to repent.
"What did you just say? Yo - I'm gonna cut yo ass so hard I'm gonna make you cry." at this point the other student has the chance to apologize for whatever they've done wrong. Pride generally prehibits that from happening. Most of the time they say, "Go ahead," which puts the ass cutter in the tough position of saying something hysterical enough to get a good laugh out of the whole class.
There are some kids, of course, who can say anything and the class will explode with laughter.
"That's why your eyes are so far apart!" one girl says, and despite the seemingly innocuous nature of the comment, the class roars. Other times kids who are less cool with their peers will make legitimately funny comments and will be entirely overlooked.
There are some defaults that they all go to. If a kid is overweight, as many of them are, they call them a big fat f-ing cheeseburger. They look at their hands and say "Look at your fat fingers - they were just made for picking up cheeseburgers!"
Sometimes it's personal - bringing up embarrassing information or incidents from the past - times you got dumped or lost a fight. It's always a show, which is why they have to announce their intentions before they begin. They need to gather a crowd - and like magic everyone's ears do perk up at the words 'cut ass,' and they listen for a story to liven up their day. It happens every day, a hundred times a day, and rarely does it seem to have alastingimpact. It's just a part of their interactions - something that makes the class function and keeps things interesting. They put one another in their places and then go back to the business of their days as if nothing happened.