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It figuratively means that something is either extremely good or extremely bad. Although, most of the time, it is used in a negative way. For example,

Person 1: "He's missed every single basket throughout the entire game!"

Person 2: "Wow, that takes the cake!"

It means that you are by far the best or the craziest or the worst at some endeavor. You take the cake- you win the prize- you are the best- that tops them all. Although if you are the best at doing something bad it would be construed as negative. It usually refers to something unbelievable like shooting 20 -3 pointers in a row or better yet losing a game that you pitched a no-hitter in. That would be unbelievable and would take the cake.I wouldn't believe it if I hadn't seen it with my own eyes that takes the cake.

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13y ago

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