German, meaning "health". Used to wish someone "health" after sneezing. It has been exported, but seems primarily to be used in the US. Similar is "bless you
You get the idea.
Used as a reply in certain contexts when someone has just said something quite verbose or confusing. "Bless you" can be used in the same way in this sense. Not all native speakers of English use it.
From the A Way With Words (waywordradio.org) radio show, Aug. 23, 2010:
Grant Barrett: "It's the second person singular indicative present of the verb 'to see', s-e-e."
Reflex response to a person who has just sneezed
I forgot to tell you, I sneezed at work the other day and farted at the same time. Ron said "gesundheit", so I'm fairly sure he heard the fart also. It was loud!