divan gave this answer on the site recently: It means 'to deteriorate rapidly'. Its origins are pretty obscure. The 'Dictionary of Catchphrases' edited by slang historian Eric Partridge, dates the term to the early 1920's. Christine Ammer, in her 'Have A Nice Day - No Problem', a dictionary of cliches, also dates the phrase to the early 20th century, and suggets that the alliteration of 'hell' and 'handbasket' probably contributed to the popularity of the saying.