I say it a lot. And I mean what it says, a genuine compliment.
I might mean that they seem happier or less tired than usual or that the haircut/make up suits them but I haven't been able to put my finger on the change, maybe they've lost some weight and their clothes fit better or perhaps they have a bit more colour in their cheeks.
Someone has just told me it's a universal euphemism for "you've gained weight" 