It is spanish for "I don't speak English" and happens to be the best excuse for getting out of everything and anything. It can be used to get out of nearly every awkward situation. The concept is further explained and demonstrated in the song "No Hablo Ingles" by Bowling For Soup.
Annoying Untrustworthy Friend: "Will you lend me ten quid"
Sensible Reply: "No hablo Ingles!!"