A generally good sign.
Indicates that your listener is engaged and is paying attention to what you are saying.
It also can be an indication that this person is quite comfortable with us because this is a display of a laid-back attitude.
Nodding is addictive, when we talk about something that is important to us - we nod and expect the other party to nod back - it's a feedback mechanism to see if we're all on the same page.
This is also true when we want to show sympathy and enthusiasm towards others, it's an appeasement gesture, just like the smile.
Of course, this happens on a subconscious level, it's so addictive that it's hard to resist not to nod when the other party does.
A perfectly still head signals the other party that:
I. We didn't get it.
II. We don't agree.
III. Even if we agree we don't really like them at the moment.
Try this with a good friend:
Just hold your head still and maintain a steady eye contact. Don't move your head no matter what. You'll notice most likely that after a few moments they will start nodding and tilting their head to encourage you (unaware of course) to do the same. If you'll continue to resist, their frustration will escalate up to a level that they will try to investigate what happened or simply lose interest in the conversation.