In terms of the concepts propounded by Eric Berne, transactions are the exchange of communication between two different persons.
These transactions proceed from one of the three ego states, viz., the Parent, the Adult and the Child, on the part of each of the participants. Additionally he has proposed that there are four life positions viz.,
I'm OK, You're OK; I'm OK, You're not OK; I'm not OK, You're OK and finally I'm not OK, You're not OK. These life positions refer the general feeling about one's own life and about the other person's life.
These positions are feelings on the unconscious level and not those on the conscious philosophical level. These transactions generally color all the exchanges that take place between any two persons in various situations. Therefore all transactions in daily life are a unique combination of the ego states and the life positions that the participants choose to take.
According to Eric Berne, all of us are born in an 'OK' life position. Later in life the OK matrix as discussed above emerges out of the various transactions. Every transaction falls in to one of the four life positions. While playing psychological games, as described by Berne, people consciously take up one of these positions.
In this context, the I'm OK - You're Not OK is a position, where one-up-man-ship is taken upon oneself. In this life position, people tend to think high of themselves; and perceive the other person to be inferior to them and hence not OK. Consequently, emotions like contempt, anger and disdain may flow through this life position in exchange of transactions with the other person. Those taking this life position talk in a complacent manner about themselves and with a high-handed and haughty approach about others. There is an attitude to contrast their own merits or perfection, compared to the shortcomings of others.
This is a natural trap that allures Managers at workplace, parents at home and others with an authoritarian role in the society, to conclude that by virtue of their position or placement, they are better placed than others, and hence the others are not OK. There might be a strong stimulus of being perfect in the people who take this position, and their actions and behavior make the others look less perfect.