What does "not biting" mean?

In a recent exchange with a highly eloquent friend (we were discussing a particularly peculiar episode he has pointed to me in a book) he replied to my comments on the episode with an idiom I've never heard before (being an ESL guy). He said literally "Not biting, eh?". What does this mean?

"Not taking the bait", from fishing, meaning someone offered you a conversational opening (or an invitation to an argument) and you didn't follow up.

To bite in this context means "to respond to a provocation or temptation". The phrase is understood to refer to a fish biting a baited hook, or possibly to Eve biting into the forbidden fruit.

So in context, something had happened that your friend expected to elicit a response from you. When you didn't respond as expected or intended, he remarked that you were "not biting".

The other answers are great. Another way it's used is when I read a provocative article (as JSB suggests) and in response I'd say "Ok, I'll bite." I then offer my thoughts on the subject.