"That's what she said" is a joke commonly said by Michael Scott, while others in the office will occasionally say it as well. The joke is meant to be said after someone says something that a woman would say, particularly in a sexual nature.
This joke has caused issues in Michael's life, e.g. during Jan's wrongful termination lawsuit, reports about sexual harassment, etc. Michael clearly expresses that he cannot stop himself from saying this, even when reprimanded seconds before not to make jokes like it.