What does it mean?
People wear a blindfold before hitting a piñata. "Hit that" is slang for sex, so the line implies someone isn't attractive enough to look at.
How to use it
It's a backhanded insult, so it only works as a roast among friends who find it funny. Don't use it on someone you actually want to date.
How to reply
You'd need a blindfold. I'd need a miracle.