This saying is a great one to use when you have the right opportunity. It basically means that the secret is out in the open and is no longer a secret. Imagine this situation:
You plan to quit your job but you don’t want to tell too many people until after you actually quit. You decided to tell only one friend but don’t want to tell any other people. Now you are together with many friends, including the one you told. By accident, the friend you told you are going to quit your job asked you in front of everyone, “so when exactly are you going to quit”? Everyone hears this question and says, “What? I didn’t know you were planning on quitting”.
Then you could say, “Well, I guess the cat is out of the bag”. It means that the secret is out in the open now and I’m not going to hide from the truth anymore.