It can also be used to imply that the action or event was taken to its extreme, with no other possible courses of actions available.
Me: "Ahahahahahaha!" *accidently walks off cliff on map Jungle in Black Ops
Person 1: "Dude, we're balls deep in the Middle East now that Obama's president."
Person 2: "Not as deep as I was in your mom last night."
Person 1: "WTF?!"