It's the Blood gang call, originally intended to simulate the sound of an ambulance or police siren to warn others of impending danger. It's implementation here is to initiate a battle with the aggressive party.
I'm not sure what just happened. So one member of an opposing group impended on the territory of another rival group. A ritual then ensued where the representatives of each group attempted to display their strengths in order to display the other sides weaknesses. Ritual warning calls were sounded by one party in order to show that they were willing to display lethal levels of strength against the other party. This then escalated to gunfire which then scared the other party off.
Although direct participant observation was impossible in this situation for the most part you are correct (based on my research). It appears that Da Club (likely a local variety hall or dance tent) has just let out due to an unseen participant's declaration that "This shit over at 3." While converging in the parking lot to regale one another (likely with debate and discussion of interpersonal relationships within the community and the organization's state of affairs) the Newark Bloods are approached by a mysterious third party; one who has possibly shown some display of challenge or disrespect within the previously mentioned establishment.
After displaying his firearm and declaring "That's a bad way to start your evening" in an attempt to frighten the troupe, the brave loner is instead jeered by his enemies, unimpressed with his gesture and confident in their possession of their own firearms.
The confrontation appears close to dissipation when the rogue soldier ups the proverbial ante by sounding his own Crypt-affiliate tribal call "Westside CBG" which incenses the Bloods and prompts them to unleash a flurry of "soo-woo" battle cries. When the rogue challenger does not respond (as is custom in this situation-either with a returning call or outright violence) the Bloods begin to boast and jeer their would-be-assailant, taunting accusing him of "Ratchet Impotence" - a gravely serious connotation throughout Da Hood. Although the subsequent footage is jumpy, it appears that directly following the taunts of the Piru the rogue Crip begins to discharge his firearm. As can briefly be seen, two Bloods actually run TOWARDS the firefight and more gunshots can be heard. The camera man ducks for cover between some cars while giggling audibly, perhaps about the absurdity of the situation, perhaps out of simple situational familiarity and boyish excitement. Although the outcome of the rogue is not documented, once the firefight has apparently ended the Bloods continue to regale one another, celebrating the enemies lack of warriors to support him and possibly organizing and converging a larger party to retaliate further.
April 29th, 1992. There was a riot in the streets, tell me where were you? You were sittin' home watching your T.V. while I was participatin' in some anarchy. First place we hit was the music shop...