1920s Lingo describing someone (something) who is great, incredible or special. Usually indicating stylishness or innovation. Pajamas were a relatively new fashion in the 1920s. The term "cat" was beginning to be used as a term to describe the out going and unconventional jazz-age flappers.
That girl wearing those Paris Hilton sunglasses must think she's the cats pajamas.
Those crazy rinestone studded platinum teeth are the cat's pajamas!