It started in Los Angeles last summer and is now being touted as the new breakdancing.
From Hip Hop's new steps, New York Times, 20 November 2009:
“Jerking started off in L.A. as just a little inner-city dance,” said one of the New Boyz, Earl Benjamin, 18, known as Ben J. “We used to search for it on YouTube and we noticed it had potential to be bigger than it was. It was like when you first saw break dancing: it has so many different parts, and when you get the dance down pat, you wanted to do it all the time. It reminded you of how fun hip-hop used to be.”
... Seen in formal terms, said Sally Sommer, a dance historian who teaches at Florida State University, jerking may merely be a cousin to the “lambada or the twist.” It is certainly, Ms. Sommer said, less physically demanding than krumping or vogueing or the other highly skilled and innovative urban forms of dance. But the lambada was a fad. The twist was a fad. And jerking, its adherents say, has a cultural resonance that goes beyond the Reject and the Tippy Toe. “Jerking is a movement, almost like in the ’80s when rap started,” said Tammy Maxwell, the manager of the Ranger$ and the mother of Julian Goins. “There’s a style to it, and a music and a lifestyle and all the kids have really jumped on it.”
The Ranger$ Jerkin in JerkVille (dancing doesn't get started until about 1:20):
New Boyz, "You're A Jerk":