When you have a clever or unique joke or remark that goes over everyone else's heads generally because they're too stupid to know what you're talking about.
Cindy: "I work in a department store. I'm a cashier."
Richard: "Oh, really? My father was a cashier. They threw him out of the army."
If someone is 'too hip to function' it means they think they are so cool they somehow have to show this off in every oppourtunity. They are 'too hip' to function like a normal person.