I actually believe 'small penis humiliation' is a form of reverse psychology, that works at quite a deep level. Hear me out, I think I have a good theory.
Essentially, no man really wants to be told he is 'not man enough' or 'inadequate', but in the context of sexuality, such statements can - for certain individuals - be a turn on, because (and this is my theory) they produce a subconscious desire to 'prove oneself', by producing an erection; i.e. the humiliation produces a surge of sex hormones because the instinctive response is to over-power the humiliator. But in the context of small penis humiliation role play, the turn on is simply enjoyed for its own sake.
If this sounds far-fetched, then consider the fact that in the real world, many fights start because one individual has humiliated another, and indeed, bullies that go around wanting to start fights on druken nights out, often find their victims by way of verbal insults first - if their attempts to offend and humiliate produce a 'rise' (pun intended) in their prey then they have found an opponent. I think small penis humiliation works in a similar way - the humiliation produces a 'rise'.
It's worth remembering that it is not only guys with small penises that enjoy 'small penis humiliation'. The size of the penis has little to do with it in these cases - it's more to do with deep psychology - that humiliation can produce a surge in aggression/sex hormones.