Sure! The joke employs a play on words that refers to the fact that amphibians like frogs usually live alongside bodies of water. So when the bartender asks the frog how it paid for its beverage, he offers $3 towards fee and then adds another layer of hilarity by using every passive phrase “It’s on me”.

Put together, you have this picture of a happy-go-lucky frog offering to pay feels humorous enough in light of one whole wordplay made-up scenario. It's what I call surprise laughter - obviously hilarious only if you get medieval twisted humor that includes animals in pubs with a tender ending? That should clear up any misconceptions!