When someone asks, "Are you back in town?" it generally means they are inquiring about your current location in relation to the place where you usually reside or where they last knew you to be.
Possible interpretations of this question could be:
Checking on your travel status: If you've recently been away from your usual residence for a trip, vacation, or other reasons, the person may be asking if you have returned to your hometown or regular place of residence.
Catching up after an absence: If you have been away for an extended period, such as studying abroad, living in another city, or traveling for work, the question could be a way to ask if you have returned home for a visit or permanently.
Reconnecting after a long time: In some cases, if you and the person asking haven't been in touch for a while, they might be wondering if you have returned to the town or city where they are located.
Planning to meet up: Depending on the context, the person might be interested in knowing if you are back in town to arrange a get-together or to catch up in person.
In any case, the question is generally asked with a friendly intention to reconnect or to understand your current location and plans. How you respond will depend on your situation and the relationship you have with the person asking.