Technically used (obviously) for using Portals in a clever way, However this phrase may be used to describe thinking out of the box in general, or a replacement for that phrase. So basically it functions as a synonym for Thinking out of the box. Often used as "Now you're thinking with portals!" etc.
Guy1:"what you doin bob?"
Bob: "Just Thinking with portals"
Guy3: Maybe we can do (something really awesome and original that I can't think of right now)
Guy4: Now your Thinking with Portals!!
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When you use portals in a clever way.
you: "I put two portals in a hallway and fucked myself."
me: "Now you're thinking with portals!"
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