Phrase from the comedy classic, Monty Python and the Holy Grail. Because of its relatively obscure nature, it is most often used among geeks and hackers. When someone uses this phrase, it is customary for anyone in earshot to point their index finger upward and wave it like a flag in a circular motion, coupled with a very insincere "yaay" - another reference to the original scene.
A: I smote the dragon, and there was much rejoicing.
B: *twirls finger in the air* yaay.