Yeah, this one is an urban myth, has been running around for years. Still good for a laugh, but not true.
If the guy were sitting on the toilet, with his pants down, and tossed the cigarette in, it would probably "whoof" and burn his butt, but that's it. It actually takes a LOT of gas (in a gaseous state) to actually explode, rather than just puff up a lot of flames, and a rag in the toilet, partially submerged, would not allow accumulation of that much gas.
Even if it did explode, his pants would not be blown away, they'd have been protected by the front of the toilet bowl, even if it did shatter and blow outward.
If it did explode, it would not have blown him out the bathroom door, it would have blown him upward - explosions happen in the direction of least resistance, in this instance, straight up.
The reason urban myths catch on, is because they have something in it that makes you WANT to believe it is true - your feelings about dumb guys, your feelings about big business, your feelings about crime, etc. They put a hook in there that makes you want to believe it enough to not examine it too closely and see the illogical parts.
A little logic applied will often prove what is a myth, and what is not - just like the dumb one about the cockroaches at Taco Bell - so completely stupid that anyone who actually THOUGHT about it would know it was not true.