A saying in live theater that means "Good Luck!" or "Have a good show!" For whatever reason, theater people tend to be extremely superstitious and afraid of jinxes, so if you actually say "Good Luck!" or "Have a good show!", they will immediately assume that the Gods of Theatre are going to come down and smite the show, causing everyone to forget their lines, sets to collapse, and people in the front row to maliciously whisper "Macbeth!" all during the performance. So theater folks say, "Break a leg" before the curtain goes up, and the capricious Gods instead bless the show with perfect performances, appreciative audiences, healthy box offices, and absolutely no broken legs.
I've heard several possible origins for the phrase. The one I don't like attributes it to the fact that John Wilkes Booth broke his leg when he leaped to the stage after shooting Abraham Lincoln in Ford's Theatre -- really, I don't see most theater folks wanting to commemorate an assassin that much. The one that makes more sense to me is that the phrase comes from a similar German and Yiddish phrase ("Hals und Beinbruch", or "Neck and Leg Fracture").