I was told by a school teacher that it was incorrect. I've seen it in articles coming from reputable sources. The general meaning would be similar to the word 'yet', but I can't find any place to confirm whether or not it is correct.
"Then too" is a familiar construction, unexceptional and unexceptionable. Sometimes it is written "Then, too, [...]" but the commas are not necessary.
It functions as a sentence adverb, asking the listener or reader to consider new material in the context of an already established line of discourse. It is, as you say, similar to yet, but has a somewhat less contradictory quality. Consider:
All of us were adept at tennis, squash, and badminton. Then too we didn't limit ourselves to racquet sports.
All of us were adept at tennis, squash, and badminton. Yet we didn't limit ourselves to racquet sports.
No. 1 has a more casual feel to it, as if the new thought introduced by the second sentence was merely an add-on or an afterthought. It is the rhetorical equivalent of thinking out loud.
No. 2 feels more strenuous. It is making a point that should not escape notice, possibly forestalling someone's foolish and ungenerous presupposition that the group was not well-rounded in the matter of sport.
Whatever teacher told you "then too" is "wrong" is falling into the prescriptivist trap that ensnares the minds of so many in that profession. How you deal with it is simple: If you have to hand in a paper to that teacher, avoid using the phrase. For all other matters, use it in good health whenever the hell you feel like doing so.
In my dialect I'd say, "then again" but I've seen it as "then too" occasionally. In some contexts I can see them being similar to "yet".
Both are informal and as such I wouldn't call either of them unacceptable if it's an informal context.
I'd recommend neither in a formal setting.