What does it mean?
You are blowing it out a bit.

Does it mean;
You are exaggerating it a bit.

Question

What does it mean?
You are blowing it out a bit.

Does it mean;
You are exaggerating it a bit.

Answer

Yes it's an exaggeration unless you are actually blowing something up.

Answer

Probably, but without context it is difficult to be sure.  Usually you 'blow out'  the budget (spend more than was planned) or blow out the timelines (on a project, something happens which means it is all going take a lot longer than originally planned).