Exploding pants (see: Pant Exploded in PipBoy) in Fallout 3 refers to a technique to blow up an enemy by successfully planting a grenade in their inventory (via pick pocketing). A successful grenade plant will warrant an instant kill...as well possibly increasing the alert level of target's allies (if any).
 Target must be human. Which to a certain extent is the only type that actually has pants to blow up in the first place. :p Despite popular belief...mutants cannot be targeted for this technique (although there are suspicious of it possible through a "Herbert saga" in the GNR radio station), thus -->Mutants cannot have their pants blown off. This also applies to animals, robots or any enemy that cannot be "pick pocketed;"
 Player must be in sneak mode;
 In sneak mode, status must be "Hidden." There are some rare cases where you can still attempt to pick pocket while the enemy is in "Caution" mode. Usually works, if the enemy doesn't have a direct line of sight to your position;
 Enemies under "Danger" alert status cannot be pick pocketed.
In Fallout 3 it is impossible to sneak up on a human opponent without detection (unless of course the human is not hostile). Thus, the only way to use this technique against hostile human opponents is to conduct it in areas where there isn't a direct-line-of-sight, such as corridors. The easiest way (besides having a 100 sneak skill) is to use a "Stealth Boy" which renders you almost invisible as long as you remain in sneak mode.
Mind you that the a successful pant will explode in a few seconds, which means you need to hurry as far away from the target as possible. This also means that if you successfully plant a grenade in an open space, there is a good chance that you will also get injured in the process. Make sure there are obstacles for you to hide behind when you see the underwear flying.