If someone says this to you, it means it's time to make a change. Your behavior or performance isn't living up to expectations.
This command was first used in the U.S. military during World War II. When a soldier was told to "shape up or ship out," it meant that he needed to do a better job or he'd be shipped overseas to a combat zone. The expression started being used after the war with any kind of poor performance or bad attitude. It means get it together — or get out!