Saying used by small minded people after absolutely EVERYTHING you say, even when what you say is totally NOT cool.
Dude: Hey babe, wanna go get a beer tonight?
Babe: Can't, I'm not feeling well.
Dude: That's cool.
Most often means something is of interest. It can also mean however, that something is not interesting at all.
"Did you hear Brandy was coming in late?"