Yeah, it means: add oil. It's what fans shout to egg on their sports team. You can also say it to a friend to egg him on. "Come on, you Reds." "Come on, Jack, show 'em what yer made of." That kind of stuff.

Literally it means "add oil". It is used when encouraging or cheering someone or some team. You could translate it as "come on" but is used more widely. I speak to many Chinese people who use "come on" incorrectly when they want to say 加油.

the colloquial meaning of 加油 has 2 cases. 1, refuel. If your car is oil deficient, you are going to refuel, you can say 加油. 2, make an extra effort. In this case, no matter the person or team(even yourself) you want to encourage or cheer behave in a good performance or bad performance, you say "加油“ to encourage him or them to make an extra effort to reach his /their goal. So,加油 is used more widely than "come on""cheer up".

这次考试你没有过关，下次要加油一点（metaphorical） 加油！赛跑的终点就快要到了 （GOGOGO）

加油 = add oil (as direct meaning) and add efforts (as encouraging yelling)