Since the second guy is clearly bigger than the first, this is a total alpha male move. He's letting the shorter guy know that he'll piss where ever he damn well pleases and the shorter guy is just lucky that alpha doesn't actually piss on him. It's a total power play... although it's also such a complete contradiction of urinal ettitquette. Terrible!
Edit to note: I do disagree with one scenario. If #2 and #3 are both taken, I believe that you should go to #5.