McMurphy has rather a lot of scars on his body due to the numerous fights he's been involved in over the years. In this particular scene from One Flew over the Cuckoo's Nest, we see Chief Bromden referring to the healing wine-colored scar across McMurphy's nose. Bromden's recounting an occasion when McMurphy once laughed at him. He distinctly remembers the way that McMurphy held his head back and looked down across the scar on his nose with one eye as if to say "You don't fool me." It was then that Bromden realized that McMurphy wasn't laughing at him because he was an Indian or because of his strange appearance. He was laughing because he'd figured out that Bromden's deaf mute act was precisely that. McMurphy was laughing and winking at Bromden to let him know that he was on to his little secret.