He is referring to the fact that he will become one with The Force - a technique only a handful of jedi have learned.

As a 'spirit' he will continue to guide Luke, and thus become somewhat omniscient - subsequently becoming more powerful.

You might say as an older man, he had become physically weak, but once bonded with the Force he becomes greater than the sum of his parts.

Obi Wan learned a specific force technique from Qui-gon Jin that allows him, after death to retain communication with the living via the force. This partially explains Kenobi's comment.

What Obi Wan is most likely referring to is the fact that if Vader kills him it will drive Luke to learn the force and take on the Empire. Obi Wan believes that since Anakin was not the chosen one, the one who would bring balance to the force, (although arguably either side winning results in unbalance) that Luke is in fact that person. Kenobi is aware of the fact that Luke will witness Vader killing him while he is clearly in a pose of surrender, and he believes this will motivate Luke to become a Jedi Master and a match for Vader.

So Obi's comment foreshadows at least two major plot developments - his post-death ability to tutor Luke in the ways of the force, and Luke's increased interest in the destruction of the Empire/Vader.

You need to understand clearly one crucial point.

Only a Jedi who adheres to the 'good' side becomes part of The Force in the event of his death.

A Jedi adherent of the dark side who perishes is truly dead; he cannot survive as a part of The Force. Hence Vader, having adopted the dark side, had no knowledge that a Jedi was capable of surviving beyond death. This is why Kenobi warns him that he has a surprise coming if he strikes Kenobi down.

We learn later, in Revenge of the Sith, that the Emperor has imbued Vader with awesome powers, by courtesy of the Dark Side. It gives tremendous power in life, but there is no existence after death. Vader has learned about the Dark Side from the Emperor, so they are both ignorant of the truth about The Force.

Ultimately, Vader saves Luke from the Emperor, turning against the Dark Side, thereby redeeming himself; hence Anakin is accepted into The Force, and Luke can see him - or his 'ghost' or spirit - become a part of it.

It is interesting to note, from Leia's reactions in that final scene, that only Luke can see Kenobi, Yoda and Anakin. Only another Jedi has the power to communicate with one who has passed into The Force. Others, such as Leia, cannot see or communicate with them.

I know this is an old post but I feel I must provide another perspective because it seems to me that many people miss the fact that Vader actually strikes an empty cloak. The Jedi, Obi-Wan has vanished before the strike.

I'll describe the scene for you: As our heroes approach the falcon (Luke, Leia, Han, Chewie and the droids) the stormtroopers are distracted by the duel and abandon their post. The heroes rush out to the falcon when Luke spots Ben and Vader. At this point Ben has already uttered the quote from the OP and now as he spots Luke, he pauses, smiles, raises his sabre to a vertical position, holds it in front of his face and closes his eyes in concentration. Vader swipes, but suddenly there is no more Ben. He has completely vanished. This is in stark contrast to all other sabre duels, where the bodily remains are always left behind.

a youtube clip (the video is perhaps a few seconds shorter than I would've liked though because afterwards Vader even steps on the cloak and prods it with his toes because he is confused that Obi-Wan has vanished)

And from the script itself (albeit an early draft, but this scene is consistent with what we still see in the film today). Emphasis, mine:

The old Jedi Knight looks over his shoulder at Luke, lifts his sword from Vader's then watches his opponent with a serene look on his face.

Vader brings his sword down, cutting old Ben in half. Ben's cloak falls to the floor in two parts, but Ben is not in it. Vader is puzzled at Ben's disappearance and pokes at the empty cloak. As the guards are distracted, the adventurers and the robots reach the starship. Luke sees Ben cut in two and starts for him. Aghast, he yells out.

LUKE: No!

So, to answer the question: why does Obi-Wan say he will become more powerful? Because that is part of his vision and his plan. In order to provide ongoing guidance to the rebellion's last hope, Luke, this is what must happen. Does Vader actually kill him? That is debatable, but in light of previous duels between Obi-Wan and Anakin, perhaps Ben has decided that neither one of them can defeat the other because they are too well matched against each other. He simply gives in to the force, transcends to his next spiritual being and lives on.

Its a reference to the power of selfless action for the greater good. Martin Luther King and Gandhi both acted in similar fashion. Their deaths were a catalyst of greater social change.

The original act of selflessness for the salvation of humanity was that of Jesus Christ. Obiwan's death (Oh be One is a play on words referencing the union of Christ the Son and God the Father) is an homage to Christ's death and resurrection. Jesus appeared multiple times to his disciples after having risen much like Obiwan appears to LUKE as a spirit several times through out the trilogy.

Death is Powerful Motivator

When Obi-Wan says this line, it's because he believes that Luke witnessing a new mentor's death would push Luke to become the Jedi he needs in order to confront and hopefully save his father and the Galaxy.

But this line of thought (striking down in order to motivate) appears in each first film, in each Skywalker Saga trilogy (A New Hope, The Phantom Menace, The Force Awakens) and it may also be a dark side motivator too such as Snoke's the thrown room scene in The Last Jedi and Darth Sidious' in Revenge of the Sith & Return of The Jedi.

Some Examples:

1. Obi-Wan is killed by Darth Vader and this motivates Luke to continue on the path to becoming a Jedi.
2. Qui-Gon Jinn is killed by Darth Maul, this motivates Obi-Wan to train Anakin, despite whatever the Jedi council has to say about it.
3. Han Solo is killed by Kylo Ren, this motivates Rey to stay the course and find Luke Skywalker.
4. Darth Sidious pits his former apprentice Darth Tyranus/Count Dukoo against Anakin Skywalker, encouraging Anakin to kill him. This tactic for Sidious is about allowing Anakin feel great power and feeds into his pain and rage, which helps cultivate Anakin to the Dark Side. Sidious tries this again in Return of the Jedi with Darth Vader and Luke Skywlaker, but the familial bond and Luke's good intentions prevents Darth Vader from doing it again.
5. In The Last Jedi Rey comes to Kylo Ren where he takes her before Snoke. Rey's fury or "spunk" makes Snoke seemingly openly wonder if perhaps he chose the wrong apprentice, angering Kylo Ren and pushing him to save Rey and kill Snoke. But when Rey and Kylo Ren are free after fighting the Paetarian Guards, Ren asks Rey to join him in ruling the Galaxy and she refuses, Ren becomes angrier. It's unclear because viewers don't yet know where Snoke really stands in all of this, if Snoke coaxting Kylo Ren to kill him was apart of some larger plan to make Ren stronger aligned with the Dark Side, but this is a very familiar Darth Sidious-like tactic by striking appointments down in fear and anger.
6. While this is bit of a variation or juxtaposition on this theme/trope, Luke also makes it appear that Kylo Ren was striking Luke Skywalker down on Crait, despite that Luke was really on Ach-To astral projecting himself. But this distraction and final act of compassion, is what saves the Resistance and lights the spark of hope across the Galaxy. At the end of The Last Jedi, Luke is in parallel to Obi-Wan at the end of both Revenge of the Sith & A New Hope.
7. During the Clone Wars, Anakin, Obi-Wan, and Ahsoka learn of The Ones: very powerful allegedly immortal Force Wielders who claim to be personifications of the Force itself. When the Son turns trying to kill The Father, the Daughter takes a special dagger and sacrifices herself to restore balance. The Son attempts to kill The Father again, but the Father then takes the dagger stabbing himself too, making the Son weaker and Anakin able to defeat him. Again it's the implication that everything is connected through symbiotic relationships and that the view of death itself is vital to how we/the characters live life.