What exactly does it mean when someone says “You’re too good for me”

Sometimes it means they want out of the relationship or not to pursue one.
Other times it means they have the worst self esteem and will carry a large amount of baggage into one.

Another possibility, a scary one, is it really is a warning. They are saying in an indirect way that they are a toxic person and if you have a relationship with them your mental health will suffer for it. They wont take accountability for their own actions because in their mind they warned you and you agreed to to continue in a relationship with them.