It might mean they have an incestuous relationship. It might merely mean that the uncle is trying to share a private joke with the nephew.
To your uncle, you are his niece or nephew.
Your uncle's nephew could be you (if you are a boy), or your brother, or your first cousin. Your uncle's nephew could also be unrelated to you if he is the son of a sibling of your uncle's wife.
You are your nephew's uncle, or aunt, and his son's great uncle, or great aunt. Your nephew's son is your great nephew.
You would be a neice or nephew, neice if a girl and nephew if a guy.
You are a great great Aunt (or Uncle) to the grandson of your Nephew.
Your brother's (or your sister's) son is your nephew and you are his aunt if you are a female or his uncle if you are a male.
An uncle's nephew and the uncle's child are first cousins to each other. The uncle's great granddaughter and the nephew are first cousins twice removed to each other.
You are the grand uncle to any children your nephew or niece have.They would be your grand nephew or grand niece.If the children of your nephew/niece have children of their own, you'd be a great uncle too.
A great uncle is the brother of the great nephew's grandfather or grandmother.
If you are male and you have an uncle, you are that uncle's nephew.
'Niece' is what a little girl is to her uncle. 'Nephew' is what a little boy is to his uncle. The children also are the niece and the nephew of their aunt.
You are your nephew's uncle if you are male, and his aunt if you are female.