a vernacular interjection-type phrase. Posed as a question (sometimes as are we cool?) it means “do you understand,” or “do you have any disagreement or argument with me, or with (some issue)?” Often repeated back, in response, it confirms understanding, agreement, mutual accord. Spoken declaratively, it can signify that things are going well, conditions are favorable, or that the speaker is on good terms with another.
When in doubt as to whether or not someone is able to get over themselves and whatever disagreement they may have had in the past with another, the question is often posed. Hey, dude, we cool? Yeah, man. we cool.