George is losing his hair, but at the same time it hasn't receded at all in the last 25 years. Instead of comforting him in his moment of distress, Lynne tells him he is bald and also has a hairy chest. Hair here is signified by intense shading, so we can only assume that George also has a hairy back. Even though Lynne has flat out called him a hairy bald man, George smiles at the end. Maybe it's because he has absolutely no idea what Lynne means, much like most of you.