It's a casual and informal way to express disbelief or accuse someone of being untruthful. It can be used in playful banter or more seriously depending on the tone and context.
Here are some more nuanced interpretations:
* "You're exaggerating"
* "You're pulling my leg"
* "You're making stuff up"
* "Don't be ridiculous"
The phrase is often used with friends or people you know well, but it's important to be aware of the context and the speaker's intention before using it.