In my opinion,if it gives 1-10 levels,不错 should be level 6-8,一般 should be level 5-6, 很好 should be level 8,非常好 should be level 9 and no one is perfect.

不錯 = not bad It has pretty much the same band of meaning as in English. In this case it's a compliment.

in fact it means you language level is so low than you need a compliment as an encouragement

Different people have different way to say this,In general,if they say this ,they mean your Chinese is good,but not very very good.

My teachers told me that when they say, "Hey, your Chinese isn't bad!" That means it's good/really good. It's a compliment- not really the same as when we say it in English where it can mean that it's sub par. And when they say it's really not bad, that just means it's fantastic.