Certainly, everybody seemed to be having a good time. At one point on "106 & Park," the rapper Jim Jones took the stage and performed "Ballin," an infectious ode to living it up that even has its own signature dance. Jim Jones taught Indiana Jones the dance (it looks like a fadeaway jump shot) and the crowd ate it up.

1. What is a 'fadeaway jump shot'?

2. What's the meaning of 'ate it up' in this context?

"fadeaway " (jumping away from the basket to create space)
http://en.wikipedia.org/wiki/Jump shot%28basketball%29
I think eat up is a slang meaning to enjoy something.
 Marius Hancu's reply was promoted to an answer.