Throughout Asia, this is a standard greeting called to friends or strangers who are passing by. In the Thai language it's a simple little phrase - bai nai, literally "go which".
I found this question a bit disconcerting at first. I didn't know what an appropriate response was, and the truth seemed rather too personal an admission to tell someone who was, often, a complete stranger. People who don't speak English often feel this way when asked "How are you?", and just as they quickly learn to say "Fine thanks" I soon learned some stock answers that were all people really wanted to hear: bai teeo going out; dern len walking (which I'd previously picked up in Indonesian for the same purposes: jalan jalan); kin khao going to eat (rice); and my favourite, bai toora which loosely translates as I've got some business to attend to.