What's the etymology of “when the sh*t hits the fan”?

Some friends and I were talking the other day and then this phrase hit the fan, so I mixed bunch of shit together to see how it fits... 

Subtitles:

What's the etymology of “when the sh*t hits the fan”? The expression is related to, and may well derive from, an old joke.
A man in a crowded bar needed to defecate but couldn't find a bathroom,
so he went upstairs and used a hole in the floor.
Returning, he found everyone had gone
except the bartender, who was cowering behind the bar.
When the man asked what had happened, the bartender replied,
"Where were you when the shit hit the fan?"

1) What's the etymology of “when the sh*t hits the fan”?

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