The "tell me about yourself" question is usually just used by interviewers to gauge your social/conversational skills. There really isn't a right or wrong answer for it, but since you are seeking a job at the company, use that question to your advantage. You can tell them about about what you studied in school, what skills you have, give them a brief summary of all of your previous jobs, and then tell them how your skills and experience are a good fit for the position. Remember what skills and other requirements they mentioned in the job ad, and if you have those skills, be sure to mention that.
I wouldn't bother with mentioning any personal hobbies or interests, unless they are relevant to the job. For example if you like to work on open-source software projects in your free time, then definitely mention that. But don't waste the interviewer's time by mentioning that you like to go horseback riding or anything that's not related to the job.
"Tell me about yourself" is such an open-ended question that it's a great opportunity to tell them your skills and experience and to sell yourself for the job. It's the best question you could ask for in an interview. I've interviewed many people and asked that question, and a few people seemed intimidated by the question and didn't know what to say. They really blew a golden opportunity to tell me why we should hire them.