Fitting in is like belonging or getting along with. Telling somebody that they don't fit in means that they are not like or are not similar to the group that they are trying to be a part of. An example sentence using this phrase that is similar to your sentence would be, "I never fit in with the popular crowd at school" which means that you were not like the popular people and you did not get along with them.

Fit - English has many means , it is difficult. In this sentence think of putting a round peg in to a square opening. It doesn't fit in. So if someone says 'you don't fit in' , refer to the situation. If a team is going to a game all in blue and you turn up wearing green, you don't fit in with the team colour.