Assalam o Alaikum wa Rahmatullahi wa Barakatuhoo...

Peace be unto you. It is a shortened form of the grand greeting: Assalamu alaikum wa rahmatullahi wa barakatuh (Peace be unto you and so may the mercy of Allah and His blessings). The greeting is recommended to be only used between Muslims.
In reply to this a person may repeat the greeting and say: Assalamu Alaikum; However, it is more fitting to reply: Wa Alaikum Assalam.

و عليكم السلام
When a Muslim is greeted with the word 'salam' or its variants, they should reply Wa Alaikum as-Salam - And upon you be peace.