What is That's What He Said?
1.
Just like
Bob: I could really use a hand.
Tod: That's what he said.
Julie: Betcha can't stick that whole lolly-pop in your mouth.
Emily: That's what he said.
See
2.
A statement used to draw attention to a phrase that could be interpreted as sexual innuendo. This interjection is used when someone, usually a female, unintentionally makes a sexual comment. The "he" is typically assumed to be the girl's boyfriend.
The inverse use
Scenario: Two girls are getting out of the pool and going to grab towels to dry off...
Girl 1 (while picking up towel): Wow, that's ones really wet!
Girl 2: That's what he said.
See
3.
The same as that's what she said, except when girls say it
girl 1: wow, there smaller than i expected!
girl 2: that's what he said!
See