This phrase means "Cheer up" or "Don't worry, stay happy!" but I understand that it can cause howls of laughter in certain circles, I can't think why!

The pecker in question is probably not a penis, I think it may come from Woody Woodpecker? Or possibly pecker meaning your beak so equating to looking up?

Briefly, "the realization that each random passerby is living a life as vivid and complex as your own." Originally from the Dictionary of Obscure Sorrows, which has a lot more beautiful neologism definitions like this you might enjoy.