This sonnet, written to the dark lady, discusses the classic lovers' agreement to lie to each other and yet to accept each other's lies at face value in order to soften the realities of their relationship. They have agreed, in essence, to create a fiction in which the poet is always young, and the lady is always truthful.
In this case, in lines 1-2, the lover, with a bit of logical gymnastics, acknowledges that he knows his lover lies even though he believes her assertion that she is truthful. In lines 3-6, he notes that she lies because she pretends that he is a naive youth "unlearned in the world's false subtletie," and the poet is hopeful that she thinks of him as a young man, but he knows that she recognizes that he is no longer young. He is willing, however, to believe the lies she has just told him. These lines continue the theme of two lovers denying reality for the sake of their love for each other--an agreement between them that their love is justification for the lies they tell each other.
In the next three lines, the poet attempts to move their love closer to truthfulness:
On both sides thus is simple truth surpress'd.
But wherefore says she not that she is unjust?
And wherefore say not that I am old?
As he admits that they both continue to deny the most obvious of truths, in the middle line here he wonders why she is "unjust," which has an ambiguous meaning: he could be wishing that she be truthful or that she admit to some unfaithfulness and use his age as the justification for her unfaithful behavior.
His answer to his own question, of course, is consistent with the theme of perpetuating the slightly untruthful basis of the relationship. In lines 11-12, the poet confirms that the key element of love is in pretending to trust one's lover, in part because an older lover does not enjoy being told that he's old.
The concluding couplet has a clever instance of double meaning:
Therefore I lie with her and she with me,
And our faults with lies we flatter'd be.
The lovers are not lying with each other but lying to each other, of course, and continue to lie to each other to overlook each other's faults.