This is a slang phrase used in most sports, especially baseball, as a compliment to a player. It usually describes a player with one or more of the following traits: sees something before another player, is able to distinguish between a ball and a strike, is good at knowing which balls to swing at, or sees something the other players simply do not see. It is used in baseball in situations where extraordinary vision helps the team, such as when a pitcher spots a player at first leading too far off the bag and throws them out. It also applies when a batter does not swing at a ball close, but not quite inside the strike zone. Having a good eye is a compliment and usually comes with training. It is not a literal phrase and makes no reference to the actual condition of a player's eye, though there are surly many sarcastic applications.
This phrase is not limited to use in only baseball, it applies to most any case in sports where good vision helps the team. A simple example is in basketball, when a good pass is made "behind" the eyes of the defense. In baseball, a good hitter will wait for the pitch they know they can hit. After doing so, a teammate or coach may offer the compliment, "Good eye on that first pitch."