Lit., it means 'be well/stay strong', and its form here is present imperative active, 2nd person plural; the singular form is 'vale' It was the commonest expression for 'good-bye' in Classical Latin; 'avete' and 'ave', which mean 'be well' also, were used for both 'hello' and 'good-bye'. It's doubtful that the sense 'be well' was primary in the hearers' minds whenever someone said 'valete' or 'avete' to him or her; the speaker simply meant 'good-bye', and unless the hearer was ill, he or she probably took it as such.