The word Peace is used in many occasions, but the most used way is when trying to stop an arguement, a fight, a clash or so.. for example two people are doing an argument whether it is a cyber argument or an argument in real life a 3rd person comes and tells one of them Go in peace! Also for example there is a group of people sitting in a room and watching TV and a person comes into the room and starts to making unwanted noise or goes totally out of topic of the show on TV so a person from the group tells him/her to Go in peace! or Peace out! Also the reverse way for using Peace is when two or more people are doing an argument/fight one of those people as intention of pulling himself out of this fight says Peace! and goes out or moves away from that place. Also when a person passes away their family/friends in his/her funeral say "May he/she go in peace! Hope this helps.

It comes from Jesus in the Bible. He says, "Go in peace, thy faith hath made thee whole." I have never heard it used in everyday conversation.

Pax Vobiscum, birader : )

Priests may say this instead of farewell... and sometimes at a funeral refering to the dead persons soul. I've never heard anyone else say it in normal conversation. Even farewell is rather uncommon.