It depends, really. There's no ONE answer.
Often, it's used to mean "I don't want to say it directly."
You want to say someone is a slut, but instead you say "She's very, uh... friendly, if you know what I mean."
Or, perhaps you don't have the right vocabulary.
"Oh my God. It was like totally awesome. It was the best ever, if you know what I mean." (Yes, I understand you to mean that you enjoyed it tremendously.)
- For Teachers