It's the perfect response when you haven't been listening at all.
It works whether the other person has been saying something funny, or sad, or infuriating, or boring....
Them: 'my girlfriend
dumped me last night'
You (thirsty, not paying attention): 'oh man, that's crazy'
Them: 'I won 500 bucks at craps last weekend'
You (hungry, daydreaming about a tasty sandwich
, not listening): 'wow, that's crazy'