It's a classier version of bite me
in that it's literal meaning is "Go away, asshole" but it is usually said to someone you like in a joking manner.
According to Fowlers, Princess Anne said it to a bunch of reporters sometime in the 1980's.
It's really obscure. Princess Anne and I are the only ones I know who say it.
"So, I was reading the comics this morning and noticed that Cathy is dieting for her wedding just like you are!"
"Oh, naff off..."