It is NOT in current use. It's not used today in ordinary colloquial conversation. I've occasionally heard it used jokingly, for comic effect, BECAUSE it is seen as old-fashioned and out of date. It's the sort of thing my late grandmother might have said (except she was very formal and never used slang). If you read it in a book, either it's an old book, or someone is deliberately using an old-fashioned phrase for effect.

From the Oxford English Dictionary: "The phrase was first recorded in the late 18th century, when it was used to mean 'something very small and insignificant'. Its current meaning dates from the 1920s, at which time a whole collection of American slang expressions were coined with the meaning 'an outstanding person or thing'. Examples included the flea's eyebrows, the canary's tusks, and one that still survives - the cat's whiskers. The switch in meaning for the bee's knees probably emerged because it was so similar in structure and pattern to these other phrases." http://www.oxforddictionaries.com/words/what-is-the-origin-of-the-phrase-the-bee-s-knees