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The gag bit is a type of bit for a horse. With two sets of reins, the gag bit gives a rider the ability to use either a standard direct action or a gag action. In this, the gag bit is related to a Pelham bit and a double bridle. Unlike these, however, the gag bit has no curb strap.
I have a different understanding of the term. Stuffing is a method to maintain transparency in a communications channel when certain specific bit or byte sequences have special meaning to lower layer protocols. For example, HDLC delimits physical frames with the 8-bit flag sequence 01111110 (hex 7e).