Being 'in the mood
' is a euphemism
for being sexually aroused
(or at least, inclined to becoming so).
Words with a similar connotation include 'randy' or 'turned on'. More graphic terms like 'having a hard-on' or 'getting wet' are far less socially appropriate.
In The Mood is also the name of a swing anthem by Glenn Miller and is one of the two most recognizable (even by lay people)
big band jazz standards. The other, of course, is Benny Goodman's Sing, Sing, Sing.