Throughout my life, I had always assumed that this song was in reference to a sexual act. A few years ago, a friend of mine gave me an alternate meaning:

Apperently, this song is supposed to be in reference to a circumstance in a bar. Some guy was trying to start some shit, and, as things were about to come to blows, made this suggestion. What he meant by it was "Let's go fight outside where we wont get in trouble."

Makes sense to me.