...and that's all we ever hear about the Pryomaniac Midget, except for this: when Joss was doing the commentary for this episode (Objects In Space), he was talking about something else entirely when this scene came up.

He stopped what he was saying just so he could hear these lines being spoken, commenting they were some of his favorites... then he laughed when they were done... and went back to what he had been saying. No explanation or background.

Maybe we'll never know.