Something was happening and they were just there... sitting on their fat asses ! But , for me, that's speaking just about an attitude of a very lazy person instead of something physical. You don't agree with they way acted , you are mad and you said : FAT ASS ! By the way... that's mean ^^

Wow. The contempt. It means "they did nothing", and gives the image of them sitting (doing nothing of course), and their behinds are fat from a habit of doing nothing.

It just means that someone was sitting down, but it's not a polite way to say it though. It's said when someone it either being very lazy, or if someone if actually fat, or both. :)