I’ve always assumed it means a woman was in false labor … so no cigars for the men because the baby hasn’t actually been born. Now I’ll have to Google it to see if I’m even remotely “Close” … er … close.
Turn out I was quite wrong.
Turns out, cigars were once used as prizes for carnival games in the United States in the early 20th century. These games of skill or chance were often exasperatingly difficult, and most people failed to win a prize — as an example, think of the smaller-than-regulation basketball hoops at many county fairs that seem to spit out every ball thrown their way. After each participant failed, the carnival barker would shout, "Close, but no cigar!"