That's a man with lady bag maybe drag maybe fag
But more no less homo

from Lupe Fiasco – Flex Hot97 freestyle Lyrics on Rap Genius

He’s pondering if the person in the previous line is a drag (drag queen, cross dresser) or a fag (bad term for homosexual). By saying “no homo” he seemingly is getting rid of that homosexual remark.

http://www.youtube.com/watch?feature=player_embedded&v=g6kVKfX0kHk

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