yes people use it. It means to not hold a grudge. What happened in the past does not matter. If you had somebody do something bad to you a long time ago, and years later you meet that person again, and you are willing to be friends again even if that person did something bad to you in the past. You are willing to let bygones be bygones. Another slang term meaning the same thing is you are willing to bury the hatchet. Also, another one: Forgive and forget.