1920s slang... someone or something wonderful or remarkable.
The other definition says it's from the '50s... In the 50s, there was a strong nostalgic fad of everything 1920s, which is why this term may have been thought of as from the '50s.
The Cat’s Pajamas: When a bearded man performs oral sex on his female sexual partner and wakes up the next morning smelling like a vagina.
“Oh man, something smells fishy here!”
“Sorry fellas, I’m afraid it’s me. It appears I forgot to wash my beard after giving my girlfriend head last night. Looks like I got The Cat’s Pajamas!”