Disappointed; failing to meet expectations.

Example: A new restaurant opens up in town and people are saying that the food there tastes great. Feeling hungry, a man named Tom decides to drop by. After he is done eating, he's not impressed, even feeling a little disappointed. Thus, he might say that the restaurant's food was 'not all it's cracked up to be.'
Note: The origins for most phrases and sayings cannot be said with a certainty. What's provided are theories that may be plausible to how a phrase originated, but not necessarily so. 

In addition, quotes that contain a particular phrase may be taken from old newspapers, poems, or books that were written centuries ago, but this by no means confirms that the phrase originates from said newspapers, poems, or books. In all likelihood, if an expression is being used in a newspaper, it's probably already a well known saying and is from an older time.
* A friend of mine named Ashley recommended me a movie, saying it was one of her favorites. I was excited to see it, but after watching the movie, I would have to say that it's not all it's cracked up to be.
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The origin of this phrase is unclear. Of note, the word "craic" or "crack" is said to have derived 
from the Middle English word "crak," which, according to Wikipedia means "bragging talk." In 
some parts of the world, the term crack is used to mean "news" or "gossip." Thus, someone 
might ask a person "What's the crack?" which basically means something like "What's the news?"

Anyways, the earliest I could find of this expression in writing is from the year 1835. Davy Crockett, 
a politician, used the phrase when he commented on someone running for president:

    "Martin Van Buren is not the man he is cracked up to be."​

Reference: Wikpedia - Craic
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Phrases and Idioms