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A polite negative reponse to an offer. Sounds like you're agreeing but actually means the opposite. This phrase is very hard to argue with without being rude. Commonly used when a salesperson tries to get you to buy something extra, or when someone who likes you but you don't want to involved with offers to do you a favor.
Poindexter: Hi Suzie! Would you like me to carry your books for you? They look heavy!

Suzie: That's okay
by Webster Papadopolous July 11, 2004
a less douchey way of saying "yeah, that's nice, but my story is way better."
Girl 1: "Oh my gosh, my ex already has a new girlfriend!"

Girl 2: "That's okay, I just found out my boyfriend's cheating on me with my sister!!!"
by mellyface November 07, 2009