When things are indeed NOT fine, or it's a little fucked, like your car just took a shit or something is not how it's supposed to be, you just say this phrase and sometimes deal with it later, or it isn't your problem.
Friend 1: "Ya know, I don't think there should be that much smoke coming out of my engine bay,"
Friend 2: "Ah, it's fine, really."
When an unfortunate event such as being knock down and the person who "knock you down" said sorry, you would say Dude, It's Fine.
This also can be use to piss someone off like Cool Story Bro.
Dude 1: I'm sorry for running over your cat.
Dude 2: Dude, It's Fine she have 8 more lives.
Dude 1: Why the hell would you like her that I thought you were going to to put in a good word for me.
Dude 2: Dude, It's Fine.
Dude 1: No, It's not fucking fine!
1. Mom language for... I want to strangle you 2. Dad language for... I want to shoot you.
3. Blonde language for... I want to tumblr shame you
4. Sister language for... I like want to like scream like a banshee
You: I dropped you're vase, mom
Mom: No "its fine"
*Mom thinks* I WILL SLIT YOUR THROAT!!!!