"Að knúsa" means "to hug". "Knúsandi" is the present participle of "knúsa", so it means "hugging". I'm not sure about its usage in practice. Translating "Knúsandi Plötusnúður" with "a hugging disc jockey" seems a bit weird to me. You should ask a native speaker to be sure, but I guess it tries to convey a pleasant feeling. :-)

Judging by other usages of knúsandi i would say its more in the area of "crushing". But the usages i found online were mostly from the Faroe Islands.

In addition you can search the term (the inflected form as well) on http://bin.arnastofnun.is/DMII/ So you can figure out the infinitive.

It's hugging or embracing with enthusiasm. If that makes sense.

The comment below is correct. að knúsa is to hug .. Knúsandi is continuous verb and means the one that is hugging something all the time, like sofandi, but knúsandi form does not exist in practical language. If you want to say that somebody were hugging each other than you say: Þau knúsuðust, eða hann knúsaði hana. Þau eru knúsandi - DOES NOT EXIST :)