Because they're good for the soul.
This is indeed a real sign for a real street found in South Yorkshire, England. The New York Times published a silly article on this and other examples of "aesthetically unsuitable names... capable of deliberate misinterpretation" spread about the UK. There are also a few books on the subject, namely "Rude Britain" and "Rude UK" by Rob Bailey and Ed Hurst.
It was none other than Butt Hole Road that originally inspired the gents to write the books:
Mr. Bailey, who grew up on Tumbledown Dick Road in Oxfordshire, and Mr. Hurst got the idea for the books when they read about a couple who bought a house on Butt Hole Road, in South Yorkshire.
The name most likely has to do with the spot’s historic function as a source of water, a water butt being a container for collecting water. But it proved to be prohibitively hilarious.
“If they ordered a pizza, the pizza company wouldn’t deliver it, because they thought it was a made-up name,” Mr. Hurst said. “People would stand in front of the sign, pull down their trousers and take pictures of each other’s naked buttocks."
The couple moved away.