Use it when showing that someone understands the basic principles or the core knowledge of a subject. After a few guitar lessons, she's got what's what down.
Pro Tip 2/3
Insight into Reality
Expresses that someone has a clear understanding of a situation's reality, beyond its surface appearance. In the business meeting, she quickly showed she knew what's what.
Pro Tip 3/3
Not for Instruction
It's not usually used for giving instructions, but rather for acknowledging someone's understanding or expertise. He doesn't need guidance, he knows what's what.