Engadget's live coverage has more context. It isn't quite a non-sequitor like TechCrunch says -- Walt actually asked Jobs about his relationship with Google, and Jobs made a joke.
6:49PM Walt: How's your relationship?
6:49PM Steve: My sex life is pretty good.
http://www.engadget.com/2010/06/01/steve-jobs-live-from-d8/