What's up is an informal way of greeting someone or asking someone if they have a problem.
A: What's up?
Your reply: Not much.
As a side discussion, another way to greet someone or ask for an update about their life would be: "How's life?"
A: Hey buddy, how's life?
Your answers: Fine, thanks. / Couldn't be better.
*If someone asks "How are you", it would be odd to reply "How are you" immediately. You would risk sounding like a parrot, or come across as making fun of your friend's question. It would be better to reply "Great, thank you. By the way...... (continue with what you want to discuss)...."