Colloquial vernacular, or slang, used to express excitement or approval, often playfully or with youthful enthusiasm (if not both). Used, as well, to describe something cool, impressive, or interesting. The usage of neato dates back to the 1950s (the OED claims 1951), and is considered nostalgic by some without being anachronistic, as it continues to be used in modern speech, possibly because it is just neat with an o on the end making it easy to rhyme.
Having said that, every generation (if not every year) has its own popular substitute or synonym, especially among teenagers and young adults. Some of those words have staying power, some do not.
iron noder