I always interpreted it as this: Boy likes girl. Girl is less than impressed with Boy. Somebody tells Boy that Girl is seeing someone else, but said boytoy is a loser who looks rather femme. Simple.
Personally, I find a huge number of Beatles songs to be WTF inducing. Some of them are just completely senseless (Octopus’ Garden? Lucy in the Sky? Yellow Submarine?), but one that completely threw me off when I first heard it was Maxwell’s Silver Hammer. Boy calls girl and asks her out, boy comes by to pick her up…boy bludgeons her brains out with a silver hammer. What?