What an awesome song...
You can't just take that one line out of context. It actually fits with the other lyrics:
Hike up your skirt a little more
And show your world to me
In a boys dream.. in a boys dream
Oh I watch you there
Through the window
And I stare at you
You wear nothing but you
Wear it so well
I'm not going to get into a graphic discussion but basically he said (during an unplugged session) that it was written from a 'peeping tom's point of view'.
He's enjoying the beauty of this woman....as a man!!!