What does it exactly mean?
in the following example:
- ¿Le queda bien el sombrero?
- Sí. Me queda bien.

Question

What does it exactly mean? 
in the following example:
- ¿Le queda bien el sombrero?
- Sí. Me queda bien.

Answer

Well, the firs sentence is a question, so the first person is mostly asking about the size, not fashion ( like in suits you? )   so queda ( from spanish verb  "quedar" that in many other cases will means "to stay" ) will mean fit

so

- Does that hat fits you?
- Yes, it fits ok!

Answer

quedar bien (algo a alguien)= to fit/suit (sth to sb)

Answer

¨Queda¨ also means stay. Example: Quédate aquí = Stay here.

It can also mean is (located). Example: ¿Dónde queda Puerto Rico? = Where is (located) Puerto Rico? Puerto Rico queda en el Caribe. = Puerto Rico is (located)  in the Caribbean.

Answer

Does the hat "fits"/"suits" you?
Yes, it does [fit/suit me]

Answer

Fits it OK?
Yes.It fits O.K.

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