It means to resume what you were talking about or the activity you were doing when you and your friend meet again. For example, if I just came back from Japan and I have seen my friend best friend for the first time in weeks, but I had to go somewhere, I would say 'we'll catch up later' meaning, we'll update each other on anything new that has happened while we haven't seen each other.

It can also just be a polite way of saying goodbye. Some people say this even though they have no intention of meeting the person again.