Shit can also mean nonsense, something that isn't real. If you say someone is "full of shit" it means you don't believe what he says. He is either lying or exaggerating. So when you say "No shit?" It's like saying "You're really telling me the truth, right?" It can also be a statement. " No shit." = "What I'm telling you is real /true / honest" Related: "Are you shitting me?" (not! "shitting ON") It would probably be pronounced "shittin" because it's only used informally. "It's for real. I wouldn't shit you." It's pretty vulgar, but a lot of people do use it, usually around friends. You would certainly NEVER use it in a professional / academic situation.

It's a crass & ill-mannered way of sarcastically saying "no kidding"...Like saying "duh!" but stronger.

I agree with BRSwartz, understand "shit" as "nonsense". And Maidhc is right in saying it's crass, so be careful when you use it. You could read it as a statement asking for confirmation: "That crazy old hobo is a millionare." "No shit?" Or where you confirm that you are telling the unbelieveable truth: "I just recorded a duet with Justin Bieber! He said I was a great singer!! No shit!!!"

I understand it's like "No bull*hit."

"No shit" contains "shit" so yes, it is a slang. You can use "no shit" to reply to somebody who just said something very obvious that it sounds stupid/is not helpful at all. Urban dictionary gives you great examples: http://www.urbandictionary.com/define.php?term=no+shit