Hawaiian hand gesture. It has many meanings. Originally it means to "hang loose", or to chill and be laid back. It can be used as a positive reinforcement. If somebody did something good, cool, or righteous; You can give them a shaka as a sign of approval or praise. It can also be used as a welcome/goodbye sign. Most people would give the shaka as a sign of wassup or hello, use it as a way of saying goodbye, and even use it as a thank you.
To make a shaka:
1. make a fist (not a tight fist)
2. extend both your pinky and your thumb.
3. lightly shake your hand (too fast makes you like retarded or like a tourist, and too slow make you look stupid.)
4. If you don't want to do the shake, you are also able to do the "I'm tuff" motion. In a downward motion, move your hand. Giving a kind of downward wrist flick at the end. It gives you a more "i'm bad look". It's mainly used by old school Local boyz.