Usually you will hang out with your friends in your leisure, it refers to spending the time with your friends together.  

hang out或者hang out with someone一般指出去打发时间，和某（些）人一起玩或放松。

hang-out也可作为名词使用，hang-out place是指常去打发时间，常去的地方。

Examples:
The coffee bar is my favorite hang-out place. 咖啡馆是我最爱去消磨时间的地方。

We usually hang out in the shopping malls. 我们常去购物中心逛。

What are you going to do tonight? Let’s hang out. 你今晚准备做什么？让我们聚聚吧。