It makes something its opposite. "Mulig" means "possible," while "umulig" means "impossible."
I think it's the same as the German phrase "Du bist unmöglich," which means the same and when people say it they describe a person as "unbelievable" and it usually has a negative connotation. Like when someone can't contain themself or when somebody did something (rather negative) you just didn't expect them to do.
I think its more like "you are impossible to deal with!" That's how it's used in english anyway. Also this could be used in a fantasy setting, though less likely.
The word "impossible", literally "not possible", literally means "not able to occur or exist". But it's one of those words that has gotten its meaning stretched. It is also commonly used to mean (of a situation) "difficult to deal with", or (of a person) "ungovernable, recalcitrant, contrary, uncooperative, etc.". Other words that are similarly "stretched" beyond their original meanings are "fantastic" (literally "dealing with fantasy") and "incredible" (literally "not believable").
Due to the Norwegian sentence given here (Du er umulig) I am assuming that Norwegians give it the same "stretched" meaning as English.