This idiom is heard when someone is referring to something that is overly priced or considered very expensive. People might be proud of something that cost them a lot of money, and will tell you that it cost them an arm and a leg. This idiom is commonly heard in both social and professional situations.
I really want to go on a holiday, but it’ll cost me an arm and a leg.
The accident he was involved in has cost him an arm and a leg. The insurance company wouldn’t pay out!