It is another way of saying "Where are you going?" but it is less direct. i.e. your friend walks out of the room and you say, "Where are you going?"
"Where are you off to?" is more casual and has a tone of opening a conversation. If you are sitting next to a stranger at an airport bar, you might ask them "Where are you off to?" It is a good way to start a conversation, like you are curious about the persons answer rather than like you NEED to know their answer? Another way you might hear the same question is "Where are you headed?"