(adj./exclamation) Can be used similarly as swag or swiggity swag. As an adjective, it's describes something that's awesome or swagtastic. As an exclamation, it can be used to express something awesome or amazing. It is commonly used by lame white boys who either think that they're black or trying waaaayyy to hard to be cool.
You might here the following in Philly:
"The Phillies are the bomb diggity."
"This cheese steak is the bomb diggity."
"The Liberty Bell is the bomb diggity, if you're into that kind of shit."
"Dude your mom was the bomb diggity in bed last night."