Context #1 -
Tim: Have you heard about the new ride and Magic Mountain called the Death Drop?
John: Yeah, I heard it's super scary. Have you been on it?
Tim: Well, we went there this weekend and I was going to go on it with my friends, but I chickened out at the last minute.
John: Really? That must have been a little embarrassing.
Tim: Yeah, it was!
Context #2 -
Christine: Did you hear about Steve and Carol's anniversary trip to Yosemite?
Stacy: No, what happened?
Christine: They agreed to go bungee jumping off this bridge, but Carol was ready to jump and then chickened out.
Stacy: Oh no! How did Steve take it?
Christine: He wasn't upset at all. He actually thought it was kind of funny.
Meaning: to chicken out is used when someone gets too scared or too afraid to do something so they back out or don't attempt it.