The 'joke' was aimed at this the distinction of 'U' [upper-class] and 'non-U' speech. In the 1950s, analysis of the speech of the upper-classes and those with upwardly mobile aspirations was analysed. The former often said things in plain language (e.g. 'what?' or 'eh?' when they misheard) whilst middle-class would try to sound posh by saying 'pardon?'. "living room" and "settee" are distinctly non-U terms for 'drawing-room' and 'sofa' respectively, hence the snide comment.

Of course, this only really has bearing if the said person is indeed upper-class, rather than merely looking down on another fellow plebian, which would indeed be non-U behaviour par excellence. [in fact, many 'working class' speech terms are more similar to U speech than non-U].

tb