In her own inimitable fashion the Elf is trying to tell a joke to Cerebus, now no matter what the Elf's other abilities may be, joke telling is not one of them.
Firstly she messes it up terribly, secondly when she does get it right, she doesn't realise until after she's told it that Cerebus is the punchline. He's none too happy about being compared to a pet monkey, mainly due to his stature.
Cerebus does not say a word during the whole thing, his expressions tell the full story. After the joke has been told, with the right punchline this time, Cerebus walks from the room and takes himself to bed. The Elf compounds things by telling that she heard Filgate tell the joke to Blakely and then begs Cerebus not to have Mr Filgate arrested.
I don't know why, but for me the Elf is just funny and Dave wrote her so well. One of the best chapters in this whole sequence. It put a smile on my face anyway.