Surprisingly, there is actually a wiki page on the matter:

Wikipedia.org - Taking the Piss

Roughly covers the following:
1

• mocking someone
• making a joke at someone’s expense

2

• saying/doing something unbelievable
• doing something unfair
• taking more than your fair share

“Are you taking the piss?” is pretty similar to “You’ve got to be joking, mate!” or “are you fucking kidding me!?!”