The Funky Butt was more of a style of movement than a dance. The idea was thus: A women would raise her skirt to show off her petticoat or what have you and suggestively move her hips. Coot Grant says: 'While she raised her skirt she would and grind her rear end "like an Alligator crawling up a bank".
The word funky was around in the 1920s to refer to an obnoxious smell, especially referring to a person who smelled bad. Anne Hegerty wrote wrote “At least a hundred years ago there was a dance hall in New Orleans whose official name was Kinney’s Hall or McKenna’s Hall (sources differ) but which was known to local jazz and ragtime musicians and dancers as Funky Butt Hall (ie Smelly Bottom Hall). Buddy Bolden used to play there, and his career ended in 1906”.
The Funky Butt is still done in many dances today and as you could probably tell became very popular within the Burlesque community.