It means "to spare no expense", mainly referring to events like weddings, parties, vacations, etc.
As parties in which "se echó la casa por la ventana" use to be not strange to some dose of wild behaviour, many people think it means "to paint the town red", but that's not the case.
It comes from an old tradition of celebrating the random acquisition of a fortune (like finding a treasure, winning the lottery or inheriting a rich grand-uncle from overseas) by ritually throwing old pieces of furniture and clothes by the window to invoke good vibes in expending the unexpectedly acquired fortune, otherwise some tragic events may occur.
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