One weird scene

First, this is a truly brilliant piece of moviemaking. An example of great 70s cinema.

The weird scene I reference is when Max and Lionel go to the bar, where Eileen Brennan curses them out. When Max starts to fight with her, a porno film plays in the background. Then Lionel is goofing around with the mannequin.

The bar just appears to be a working class joint. So why is there porno playing, and what's up with the mannequin? I loved the strangeness of the scene.