When Fred was singing his song, they bleeped out the word f*g. But when Simon halfheartedly tried to get back at Fred by explaining that in Britian, a fag is a cigarette, therefore he just sang a song about how Simon is a cigarette (to which Fred replied, "yeah, I'm sure you've been smoked plenty of times"), "fag" wasn't bleeped out.
Sure, context, blah blah, but way to spill the beans. I mean, where's the secret in that? Simon could have been a fig or a fog, but there they go, showing their hand and reavealing that Simon is in fact a fag. Censors are no fun.