In Shakespeare's writing there are usually quite a few different meanings going on under the surface.
Here the obvious word play is on the homophones 'tale' = a story and 'tail' - the end of an animal's spine.
But also, in Shakespeare's time 'tail' was a rude way to talk about sexual organs - so in fact this passage would have been interpreted as extremely rude at the time. Shakespeare doesn't let the sexual joke become too obvious, but he used to put in plenty of rude jokes in his comedies to keep the 'groundlings' (the uneducated spectators) happy.
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