There are a few possible reasons why someone might say this:
* Humorous exaggeration: The phrase might be used to emphasize the cuteness of something in a lighthearted, humorous way.
* Wordplay: The phrase could be a play on words, using the common expression "cute as a bug" and adding "in a rug" for a silly twist.
* Individual creation: It's possible the phrase originated with a specific person or group and has spread through word of mouth or social media.
While the phrase might not have a long-standing history or definitive origin, it's a fun and creative way to express someone's or something's adorableness.