Grammar: It's the difference between knowing your shit and knowing you're shit.
Grammar's Crucial Difference
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Explanation
This joke plays on the different meanings of "your" and "you're." The first "your" is possessive, meaning you have knowledge of something, while the second "you're" is a contraction of "you are," implying that you are a bad person. It's a bit of wordplay with a dash of vulgarity.