A 'cute' abbreviation for 'fabulous'. I've been told it's mid-60s slang, and since I wasn't alive then, I'll believe what I'm told about that decade. As for myself, I picked up it's usage from "Animaniacs", then place where I've learned everything else I know.
Best if said with an accentuation on the 'u', almost as 'oo', like "Faboooooo!".