When something is not bad, or not very bad, you say it's "not that bad". You can use this when something isn't as bad as you expected it to be:
I had a cup of coffee from McDonald's, and it wasn't that bad.
You also use this when someone else thinks that something is bad and you want to reassure them. Like when a child is about to get a shot at the doctor's office, you can say:
Don't worry, it's not that bad. It'll only hurt for a second.