The term for this is "Cathole".
The proper use of a cathole:
Use a 6-8 inch deep hole away from the campsite, and at least 100 feet from the nearest water. After use, cover the hole with soil. DO NOT put toilet paper in the cathole.
The logic behind this is that nature will take care of breaking down your waste products over time, just like it does with the wastes of all other animals.

Most toilet paper will not break down the same way, that's why you don't put it in the hole.

In basic training they told us to carry a bag to put waste in that wouldn't break down naturaly. Also, leaving nothing behind but a covered-up hole with poop in it made it harder for the enemy to detect you were in the area.