People use this term when they damn well know that person exists, the real answer to that remark is that they are still left pressed and angsty at a most likely superior individual that got them pissed, not too long ago, to make themselves feel better about themselves because they probably got intensely bullied by the person they "forgot they existed" about.
Person 1: It's me bitch. You remember me?
Person 2: I forgot you existed. You're totally irrelevant to me now.
Person 1: I found out you were making a discussion OF me, with your friends, Lay off the lying hoe and man the f*ck up.
Person 2: Who cares. You're so full of yourself, (and better than me) , that I had to make myself feel a little better by saying I forgot you existed. Leave me alone!