Basically it means "What's going on". It's a slang form of greeting.

Anyplace else but the kitchen, it means "what's going on" or "what's happening", as you say. In the kitchen, with the smell of <add your favorite dish here> in the air, it can be literally interpreted as "what food or dish are you cooking?" If somebody is "cooking up" something, it means that they are planning something. The most negative form of it is to "cook up a scheme" - a plan to do something negative.

"What's" is a contraction (an English contraction, not a lady giving birth) that means "what is". "What is cooking?" would be the question. (What's going on could mean "what is happening", "what is new", "anything happen?".