Rest in peace can be heard at funerals and seen on gravestones; it's a term used to express grief and goodwill toward someone who has died.
It's common in English to use rest to talk about death, as in expressions like final resting place (used of a grave), or laying someone to rest (used for funeral rites). So when you say rest in peace, you're saying that you hope a person who has died will have peace in death. It ultimately comes from Christian ideas about the afterlife, although not everyone who uses it is Christian. Sometimes, the Latin version requiescat in pace or the abbreviation RIP is used instead.