What is the context of this conversation?

Here's a link to a site that will give you the entire script:

http://www.script-o-rama.com/movie_scripts/o/officer-and-a-gentleman-s cript.html

If you search out that text "wipe that stuff off your mouth", it appears right around the time that Zack and Paula went to her family's house for dinner, where Zack met Paula's mother and father and her younger sisters, the Pokrifkis.

The scene basically centered around Zack, in his Navy uniform, sitting at the dinner table with the Pokrifki family. He had presented Mrs. Pokrifki with a bouquet of flowers. She thanked him for the flowers, to which Zack replied, "It was my pleasure." One of Paula's younger sisters made the comment that those [flowers] were the most beautiful things she had ever seen. She was obviously smitten with Zack; she was wearing lipstick, maybe trying to look older than her age. Her father noticed her trying to flirt with Zack, looked at her, noticed the lipstick, and told her to "wipe that stuff off your mouth" (handing her a napkin as he said it).