I hear this in my family all the time.
It’s usually spoken when you think you’ve misheard what someone says. We use this instead of, “What did you say?”
Blake Shelton (1st time I heard Sure Be Cool If You Did): “Now you’re standing in the neon, looking like a ho I want to be on…”
Me: “Do what? Your wife is gonna fill you full of lead.”
Blake (2nd time around): “Now you’re standing in the neon, looking like a high I want to be on.”
Me: “Oh. That’s better.” (Yes, I talk to the radio, especially the DJs. “Shut up and play some music.”)
The next time you misunderstand someone, let your Southern come out. It rolls from the lips rather nicely. Is “Do what?” a phrase you’ve ever heard or used?