A Canadian girlfriend is a girlfriend that a man (usually a teenager) claims to exist, but whom his friends and acquaintances have never met, because she lives in Canada (in the classical formulation, although other reasons for her absence can be given). Other than living in Canada, the Canadian girlfriend also does not exist, and is merely something invented to cover up the young man in question's sexual and romantic inexperience, and perceived geekiness or homosexuality.
The Canadian girlfriend seems to be a fairly widespread figure of speech, although I do not know if there is a single locus classicus for the Canadian girlfriend. It may be a well known fragment that has just spread, via word of mouth, until it is well known in the culture. It is, indeed, the type of story that many different young men could make up on their own, although now that it is a cliche, most people would probably be too sophisticated to use it.
If one so desires, "Canadian Girlfriend" can also be used to refer to anything that is done by hand waving, and by reference to an entity that can not be confirmed.