What does "dine out on it" mean?

Something that will assist your popularity. It doesn't mean the person gets free meals. It means he will be invited to join in social functions based on whatever that something is.
Examples:a great joke or jokes that people like to hear more than once or
a talent such as singing, story telling, etc.
 
Tell him a funny story and he will keep on repeating it for ever, in order to impress people.
The idea of "dine out" is this case is that of someone else paying for your meal, i.e. that the joke, if retold at a dinner party will so impress the other diners that they will pay your share of the restaurant bill (not perhpas in reality but figuratively!).
 
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