What did my referee mean by asking about my "Plan B"? I am applying for PhD this Fall. Came across one of my referees today, had a great conversation and then he asked if I had a plan B if I would not be admitted. Does it mean he thinks I'm not good enough?
Don't overthink this.  It sounds like he's just showing a friendly interest in your plans.  No matter how "good" you are, graduate admissions always has some degree of uncertainty, and so everybody should consider what they will do if they don't get admitted.  He just wants to know what that would be for you.

If he really didn't think you were good enough, he wouldn't have agreed to be a reference for you.