Used in reference to really fat and annoying girls with laughs so shitty-sounding that you could recognise them from a mile away, who think they're hot.
Can also be used in reference to a friend liking somebody who is unspeakably ugly - 'He thinks the
cabbage's the cake'. (If this is used on you, then I advise using 'He thinks my cake's the
cabbage!' to explain the situation.)
Can ALSO be used in reference to somebody good-looking who thinks they aren't - 'The cake thinks it's the
cabbage'