When you introduce a suggestion with "by all means", it shows that you really think that the listener should take your suggestion. It's a way of showing that you're serious about what you're saying:
A: Can I sit and watch you work for a few minutes?
B: By all means.
People use "by all means" in arguments as well:
A: I've had enough of you! I don't have to put up with this, you know.
B: If you want to leave, by all means, go right ahead.
Another way to explain "by all means" is that it's like saying "Don't hesitate."