Think I can help out here.
When I was a kid in West Yorks the way you'd choose "king of the castle" or who was "it" for games of tig etc, would be to stand in a circle with your "spuds in" (fists in the centre of the circle). The leader (usually a self appointed bigger kid) would then recite the following rhyme while pointing to each person's "spud" in turn with each syllable of the rhyme:
Ip dip my blue ship
Sails on the water
Like a cup and saucer
The owner of the "spud" identified at the end of the rhyme would step out of the circle knowing that they would not "be it" or "king" depending on the game. That person would be said to have "dipped out". Not necessarily a bad thing!
Any decision, it often seemed, could be made by "dipping for it".
To "dip out" meant, by extension, in our juvenile lexicon, to have missed out on something by misfortune.
Ah happy days, could've lived without the chinese burns though.