The dynamics of the joke have been explained so I won't rehash that but I don't see the meta-joke being mentioned here so I'll explain it.
A kind of meta-joke, a joke above the jokes, is to tell a series of really unfunny jokes. So while the jokes in and of themselves aren't funny the string of jokes clearly not meant to be funny can be funny. If it's just one joke you might say, "Meh, that wasn't funny." But a barrage of really stupid jokes, if they are ridiculously unfunny like the one above, is funny.
And finally it's kind of an inside joke that some people actually find the unfunny jokes funny. That's a meta-joke on top of the meta-joke.
P.S. I don't find Chuck Norris jokes funny either, but I get it.