It means kuuki yomenai. A friend explained this concept as follows:
In Japanese culture, the social
protocol calls for utmost attention to
the right "atmosphere." Certain
actions can only be considered
appropriate when the "atmosphere" of
the time and place allowed for them to
be carried out. In Japanese lingo, it
is "reading the air" (空気を読む)and for
every person deemed to be lacking in
such skill, the term "KY" ("cannot
read the air, "Kuki Yomenai," 空気読めない)
is ruthlessly (albeit sometimes
jokingly) applied. The presence of
these KY people is definitely a source
of massive awkwardness and
discomforting bluntness in any social
gathering, whether work-related or
otherwise.
Well, being careful to avoid KY-ness
is obviously of high importance in
certain work conditions. In the
presence of one's superiors, or worse,
external guests, doing anything KY,
i.e. making overly argumentative
comments against the others,
aggressively doing something that
should be reserved to the superiors,
and so forth, as a new graduate, is
bound to be highly humiliating and
irritating for the superiors.
Sadly, one common example of KY is when leaving work. Unless you avoid KY, it will be considered rude for you to leave work, but of course this depends on the environment.