It's a way for the skier to communicate to the boat driver that they are not in distress and are enjoying the ride. It's especially useful when the skier is facing away from the boat and cannot easily make eye contact.
Here are some other signals used in waterskiing:
* Thumbs up: The skier is ready to go.
* Thumbs down: The skier is not ready to go, or needs to stop.
* One finger pointing up: The skier wants the boat to slow down.
* Two fingers pointing up: The skier wants the boat to go faster.
* Fist clenched: The skier wants to stop immediately.
Always be sure to communicate clearly with your boat driver and follow the established signals.