According to Grand Maester Pycelle, Varys was born as a slave in Lys. ... The man gave Varys a potion that made him powerless to move or speak, but did nothing to dull his senses as his manhood was cut off at the stem, then burnt in a brazier in a blood magic ritual.

Why did the Sorcerer cut Varys?

Varys was originally intended to give the speech about his past to Tyrion on the eve of the battle of the Blackwater, as he did in the novels. Due to time constraints, however, it was cut out, so in Season 2 episode "Blackwater" he only considered telling Tyrion, then stopped and said he would tell that another time.

Why was Varys mutilated?

15 He Was Castrated by a Sorcerer

Varys experienced the excruciating pain of his own castration, and watched as his genitalia was burnt in a fire during a blood magic ritual. The sorcerer had no further use for Varys, and so he was thrown out into the street to starve or die.