naval slang: Job
well done.
"Bravo Zulu" is from the phonetic alphabet employed by the United States military, meaning "BZ". It can be transmitted by voice, semaphore, or Morse Code ("dah-dit-dit-dit, dah-dah-dit-dit"), but was originally intended to be signaled with signal flags as part of the International Code of Signals.
There's nothing special about the letters "BZ" except that in the Allied Signals Book, on the second page of two-letter signals (page Bravo), the last entry (entry Zulu) has the words "job well done" next to it. A captain in the flagship wishing to signal this message to other commanders in his group would hoist the "B" flag and the "Z" flag: a red pennant (square with a triangular bite missing from the fly side), and a square flag divided into quarters diagonally, colored black-yellow-blue-red (clockwise from hoist side).
While it is still used in the navies of U.S. allies, today's joint operations environment has caused a significant amount of leakage across service boundaries. Higher ranking officers who find the need to dole out praise frequently may adopt this shorthand in their spoken slang, even if they were never in the Navy. The term proliferates despite the fact that it is longer than the phrases "good job" or "job well done", probably because there's a certain amount of boyish attachment to using obscure "secret codes" in the military. To my knowledge, the choice of the word "Bravo" in the signal is unrelated to the Italian word used to praise a performance in an opera or music hall.