Heard it quite a few times in television series episodes but find it hard to use it in real life. I have found this question 'Use of the expression "Stop it! You are too cute"' which I think is similar but was closed for being too broad and it has only one answer and it doesn't give the context when we could say something like that.
- What does it mean?
- Where and when and why exactly do we use it?
EDIT: One of the memes which I found is "http://i.imgur.com/eGtLLO8.jpg" where they use this phrase. Just a quick google search result. One more gif which I found was http://angpal.com/wp-content/uploads/2014/03/oh-you.gif Not sure if it helps the cause though