It means "you're good"/"you did well/you're doing great", but also "good job" or "kudos" and so on.
Primarily used in informal parlance, it's a way to express that you're impressed with what someone does or just did. It can be used to say that someone is performing well on a regular basis ("Studi molto a scuola. Sei in gamba" oppure "sei un ragazzo/a in gamba, lo so che studi molto") or that something just happened that impressed the speaker ("Hai fatto centro! Sei in gamba").