This drinking toast has a variety of meanings, but they all stem from the main source of expressing good spirit and humour and a way of wishing success or happiness to someone who is drinking with you. It has also been used in the world of horse-racing where the winning horse kicks mud in the eyes of the losing ones. It has been connected to farmers raising a glass to the success of a good harvet, with mud in the eye symbolising a plentiful crop.
This toast may have a risen from the story found in chapter nine of the Gospel of St John, where “mud in the eye” is a medium of healing and well-being.