When you flip the Bozo Bit on someone, it means that you put them in the Bozo (the clown) category so you never take anything from them seriously again. This is a major step, not easily reversed. "
I had never heard of the Bozo Bit until a manager told me he thought I flipped it on people 'too soon.' (I thought a couple of years of evidence of uselessness was adequate but he basically never wanted me to flip it on this one particular person. Everyone knew this person was a Bozo except the manager.)
So, upon learning of this great concept of the Bozo Bit from the manager, I promptly flipped it on him, since he clearly had no idea who was doing what in the company.