It means that you should not be so mentally/emotionally hard (demanding) of yourself. It is usually said to someone when it is obvious that they are focusing too much on a mistake that they have made or they are trying too hard to accomplish something but not getting the success they want. It has almost the same idiomatic meaning as "Give yourself a break." The image is of you catching a fish on a hook and once you get it out of the water, it is wiggling around, struggling to get free. Let it off the hook. "Hey Nozturk, learning English is hard. You seem to always be dissatisfied with your progress. You should let yourself of the hook." (Just kidding, from what I see, you are doing quite well!)

Don't be hard on yourself. It's not your fault.