Number rows within group in increasing order in a pandas dataframe

Use groupby/cumcount:

In [25]: df['C'] = df.groupby(['A','B']).cumcount()+1; df
Out[25]: 
   A  B  C
0  A  a  1
1  A  a  2
2  A  b  1
3  B  a  1
4  B  a  2
5  B  a  3