It works because the contents of wtf is now in a function...

8bitTimer.c

/*
 * _8bitTimer.c
 *
 */ 


#include <avr/io.h>
#include <avr/interrupt.h>

// Port C LEDs
#define PC_LED1 0
#define PC_LED2 1

unsigned int extraTimer = 0;
unsigned int countLimit = 20;

unsigned int TcLedSignal = 1;
void wtf();

int main(void)
{
	DDRC = (1 << PC_LED1) | (1 << PC_LED2);
	PORTC &= ~3;
	
	// Set Timer0 Prescaling
	// 1024x prescale:
	// 7.. 2 1 0
	// ... 1 0 1
	TCCR0 = 5; // 0b00000101. 1 its the number 1 in the 0th bit.
	
	//set time to 0 for no reason, I'm pretty sure RESET defaults it to zero
	//TCNT0 = 0;

	// enable overflow interrupt
	TIMSK = (1 << 0); // 0b00000001
	
	//global interrupt enable
	sei();
	
	while(1) {
		wtf();
	}
}

void wtf()
{
	if (TcLedSignal == 0){
			PORTC ^= ((1 << PC_LED1) | (1 << PC_LED2));
			TcLedSignal = 1;
	}
}

ISR(TIMER0_OVF_vect)
{
	TCNT0 = 0;

	extraTimer++;
	
	if(extraTimer >= countLimit)
	{
		//PORTC ^= ((1 << PC_LED1) | (1 << PC_LED2));
		TcLedSignal = 0;
		extraTimer = 0;
	}
}