What does "no cost" really mean with FHA Streamline refinance? Does it really mean no cost?

It means you are paying a higher rate and the lenders is paying the cost from rebates received from the investor providing the loan funds. You will be paying .375% to maybe .75% higer rate for a no cost loan.  No one can really work for free. 

It can mean that, but it usually doesn't.  There are costs associated with doing a streamline loan, and someone pays those costs.  Ordinarily, though, the costs are smaller than on a regular refinance, and your loan officer also will pay many of those.

New FHA regulations mean that your principal balance will likely not increase except for the addition of the new up-front mortgage insurance premium.  What that means is that the costs of the loan will have to be paid out of your MI refund and the interest-rate rebate your loan officer gets, unless you want to pay them.  Practically no one wants to.

But the better question probably is - is it worth it?  And it may be.  If your payment savings is large enough that the cost of doing the loan is repaid to you in less than 3 years, then I usually advise it.  Depends on your situation.  Your loan officer should be professional enough to make those calculations and give them to you without your having to ask.  If he isn't, find one that is.