Ok I did some research and here's what I found...
The History: It's a long-standing Japanese folk belief that a nosebleed may signify sexual thoughts or arousal. The belief may have come into being in part because nosebleeds are reportedly more common in men than in women, although of late the joke of a female character suffering nosebleeds due to perverted thoughts has becoming increasingly popular, such as in Maria+Holic, Kannagi, and Doujin Work. On the other hand, if the Japanese folk belief has roots in the reality of who suffers nosebleeds, the trope should be more about dirty old men than teenage boys: nosebleeds are also more common in those under 10 or over 50. But in Ranma ½, it's young and innocent Ryoga, not raunchy old Happosai, who suffers frequent nosebleeds.
Real Physics: A nosebleed, or epistaxis, can be caused by dozens of factors, including blunt trauma, an acute infection, allergies, dry air, and a variety of diseases and conditions, including hypertension (high blood pressure). The area from which most nosebleeds come, known as Little's area (the front part of the nose), sports a high density of capillaries; small blood vessels which are easily ruptured.
The association between epistaxis and hypertension appears to be disputed in the medical community (as seen in the conclusions of these three studies). Nosebleeds are seen as a possible symptom of ongoing hypertension by the U.S. National Library of Medicine; however, the Library does not cite sexual arousal or a temporary increase in blood pressure as a cause for nosebleeds.
