A slurrish contraction of 'Is that so'? Used more commonly in the eastern US states, particularly New York and the New England region. It's a bit on the sarcastic edge.
Donny: I'm the baddest smartest and best looking superstar in this school. Chicks dig me.
Eddie: Zatso?
The best person you’ll meet. Such a big heart and a person you could trust with your biggest secrets. Can be sensitive but doesn’t show it to act strong but oh my she is so don’t test her.