It's an informal way to give someone permission to do something, often in a casual context like:
* "Tu veux aller au cinéma? Peux y!" (You want to go to the cinema? You can go!)
* "Peux y, j'ai fini de travailler." (You can go, I'm finished working.)
It's important to note that "peux y" is very informal and should only be used with close friends or family.