Acute,
temporary reduction in size (and
shriveling) of the male external
viscera.
Shrinkage is most often caused by temperature change. Ladies, never judge a man just after he's climbed out of the pool.
Why is this? Babies! We all remember from health class that the testicles are sperm factories, right? They exist to manufacture sperm at the highest possible rate. This is a temperature-sensitive process, so climate control must be maintained. Now, it turns out that sperm is best created at a temperature somewhat below what the usual human body holds internally. Therefore, in males, the reproductive part of the viscera exist largely outside the body. To provide finer climate control, the scrotum has the ability to draw in closer to the nice, cozy groin when things get cold, and sag further away, while hiking through the tropical rainforests. The upshot being that shrinkage is just another part of the male strategy for maximizing descendants.
Bonus corollary: If you guys want to make a baby, you may want to wear boxers, as they provide the freedom of movement for this phenomenon. Briefs will keep everything snug against the body, eliminating any benefit. As far as I know, this has nothing to do with impotence. Sorry.
Shrinkage is also linked to mental state. Often, the mere idea of a sharp kick, right in the breadbox, will cause the penis and testes to draw in closer to more protected regions. Sometimes, men will groan in sympathy at the sight of another man taking one for the team. This isn't always just for show. There is an actual physiological event taking place. Not really pain, just a shared, primal response.
I cannot believe that this most important topic had not been written up. Not everybody watched Seinfeld, people!