There's an incidious item floating around SL, and so far, I've found two versions of this. One is called AvatarLol..and another is incorporated into a standard cage gun. What happens with the first is that when someone wheres the item and clicks on it (a Hud), the it sends a message to all avatars in range (20 meters or so) asking for permission to hug. When this happens, though, the avatar is rendered stretched and distorted in a very ugly way. As for the cage, the same thing happens if you sit on it. There's also a variation of this that when you touch, you will be asked permission to do something to you...not sure what the message would be...but once you say yes, you are borked.
Inside each item (and I'm sure there are other variations) are animations that stretch and distorts the avatar (it's really quite ugly). The only thing you can do to fix this, is to relog.
Don't accept hugs, kisses...or anything else from someone out of the blue
Don't sit on a cage.
Be careful and if this happens to you, Abuse Report it immediately.