not too bad - If you say this, then you're still good. The implication is that you are good, but could be better. So, you could say you're just little bit bad, but not so much that you can say that you are bad.
not bad - You're good.
not too bad - What would have to change in order to just say "not bad" or "good". By saying "not too bad", we could think that not a lot has to be changed.
How's it going?
Not too bad.
The speaker that says "not too bad" wants to inform the listener that things are good, but there is room for improvement. Things are bad, but still good as well - not too bad.