Double Entendre

Woman 1: Do you know Arthur?

Woman 2: Oh yes, I know him very well.

The intended meaning, of course, is that Woman 2 and ‘Arthur’ are intimately familiar. 

Double Entendre is a form of wordplay. It relies on an ambiguity in the phrasing or use of words in a statement. It is when a statement can be ‘read two ways’ (or three ways for a triple entendre). 

Typically the joke works because one reading is perfectly innocuous, whilst the second is rude, tawdry, or sexual.