chill or chill out means to "stop" or "cool down" from being excited or serious about something.
You also need to know the context, above is when you're very angry/serious about something/someone and the other person say this means he/she is bother/upset by you.
If in a generally peaceful conservation/situation, somebody say this only means "don't be so serious" or "take it easy". Not really upset by you.
Since this is conversational language, this is just some possible meanings.