The expression 'by all means' is saying 'of course', 'definitely, 'for sure', 'no problems'. The important point is you are granting 'permission' and saying 'OK' to some request or comment. "Do you mind if I have a second helping of that dessert ?" "By all means, go for it". I say it is ok and grant the speaker 'permission' to have the extra helping of dessert. "Do you mind if I leave early ? I have another appointment in an hour ?" "By all means, we can finish later" I grant the speaker 'permission' and say it is fine/ok to leave early and that it won't bother me.

It can be used as another way of saying “of course” or “sure”. An example would be Question: “Can I take the last piece of cake?” Answer “By all means”