Philip II was called Philip Augustus because he greatly increased the territory of France.
The word Augustus means "majestic" in Latin.
Philip II ruled France from 1180 to 1223. He made the Crown more powerful than any feudal lord, more than tripled the royal domain, and turned the balance of power between France and England in favor of France.
Philip II's biographer, Rigord, was the one who called him Augustus. Rigord compared Philip II to the Roman ceasars because he had enlarged his realm and increased its income.