A response to a question of which you have no idea what their referring to (most likely due to inattentive listening or generalindifference to the subjest matter)
James: I am going to punch your lights out you freak!
Bob: Yeah, it is nice out.
Sarah: Does this outfit make me look fat?
James: Yeah, it is nice out.
"It's so nice out, I think I'll leave it out" is a phrase used when stating pleasant weather. The phrase implies that the weather is so nice, you'll leave your dick out, hanging brain, because the cool breeze feels so nice on one's genitalia.
Man, it's 73 degrees outside? It's so nice out, I think I'll leave it out!