Sometimes I just say I'm "on hiatus". Other situations, where I know that the person is sizing me up or forming an opinion about me, I refer back to my last "real" job.
Sometimes it's just a conversational ice-breaker, but usually it's more than that. Deconstructed, when a person asks this question, what he/she is really trying to do is gauge social status . . . high earner, successful, winner; or low earner, struggling, loser. After all, in our society people are judged more on their financial status than on their character; or rather, financial status is seen as an indicator of character. Those who are doing well are presumed to be upstanding, honorable & morally upright, while those who aren't are presumed to be lazy, shiftless, incompetent, stupid & morally suspect. I guess this is why alot of people will do anything to APPEAR successful - drive an expensive car, wear nice clothes, live in a fancy house - even if it drives them deep into debt.
As recently as 5 years ago, I was doing pretty well for myself - had a $40K/year job maintaining/updating a web site for a large mortgage banking firm. It was everything I ever wanted in a job - good pay, low stress, supportive environment. I lost this job when the company was bought by another firm, which subsequently went into receivership. Since then I've been a case study in downward mobility. Though I've managed to make ends meet, I've not been able to hold a "real" job for longer than 1 1/2 years, for reasons that might be familiar to fellow Aspies. I've been on unemployment twice, been rejected for it another time. Now I just do odd jobs & try to market some of the skills I have. During the warm season I teach private kayak lessons & canoe lessons to kids at summer camp. It's decent money, but it doesn't seem to have the same cachet as "Webmaster at XXXX Bank".