When someone asks you a yes or no question, and the answer is very obvious, you can answer with "Are you kidding?":

A: Claire, will you marry me?

B: Are you kidding? Of course I will!

To "kid" someone means to make a kind of joke. So when you ask "Are you kidding?" it kind of means "Is it a joke that you're asking me this question? You should already know the answer!"

This phrase usually sounds friendly and positive.