Haha! I've never heard that before.
It would mean this: When you're in the bathroom, after you take a length of toilet paper off the roll and prepare to use it, do you A) fold it up neatly in a square, or B) scrunch/crumple it up?
Everyone has a routine when using the toilet. After defecating, some people take a string of toilet paper and fold it so that it is two or four layers thick, while other people just pull out a long piece of toilet paper and squeeze it together into a wad. It is just one of many humorous ways to split the population of the world into categories.