As you know: being the "shit" means being the best/badass. So if that's what the shit means then people started using it in other ways as in ways that the actual word shit is used in (i.e. Shitting, shitted).
A rapper known as Sleepy Hallow once said "... I'm 'bout to shit again", which means he's about to drop a fire ass song again.
Person 1: "That n* shitted!"
Person 2: "He's the shit"
shit is a word for things like taking a poop or saying "aw shit" when you step on dog poop or cat poop
Bob: AW SHIT I STEPPED ON DOG SHIT
Rick: no worries we can clean up the shit on your shoes
Bob: Thanks
Everyone knows it means poop,but you can say it when you're angry
The stuff that comes out of an anus. Some times used as a racial term.
"His shit is crusty" "u little shit"
The stuff that comes out of your anus
Johnny: I took a shit.
Jim: Ok