It tends to be used primarily as a counter phrase when one is made to feel uncomfortable. Also used if the user feels they have over stepped some boundary.It's usually followed by a new topic as quickly as possible, or by silence.
The use of ya instead of you directs the listeners mind to a softer, less serious side of speech.
Person 1.. I sure am glad I met you. I think we could be great together, your so special.
Person 2.. Oh.. you know I love ya. Hey did I tell you my cat had kittens?
Person 1..I never get so drunk I forget what I did.
Person 2.. Really? so you remember hookin' up with your second cousin at the club last week?
Person 1.. No you didn't!
Person 2..Oh, you know I love ya girl.