Use this expression to talk about the limits of something, and compare it to other things that have the same limits. 

For example, if a city is small and not very exciting, but is more fun than other cities of the same size, you can say:

It's a fun town for what it is. 

We usually use "for what it is" in these expressions:

accept (something) for what it is 

enjoy (something) for what it is

appreciate (something) for what it is

Or you can use it when evaluating something:

It's pretty good, for what it is.

There's also a similar but separate meaning of "for what it is". It can mean "the true quality of something". That's the meaning of phrases like:

recognize (something) for what it is

see (something) for what it is

For all meanings of this expression, there are also the forms "for what he is", "for what they are", "for what I am", etc.:

I wish they could just accept me for what I am, instead of always trying to change me.