I don't know what's more telling--the number of pages in the Wikipedia talk page argument over whether the 1/87.0857143 scale is called "HO" or "H0", or the fact that within minutes of first hearing of it I had developed an extremely strong opinion on the issue.
In model rail construction, the HO scale refers to the most popular scale for modeling railroads, in which 3.5 millimeters in the model corresponds to 1 real-world Imperial foot. As the comic suggests, it works out to a ratio of about 1:87.1 (or 3048:35 exactly, which equals 1:87.0857142). In Europe, the scale is defined as exactly 1:87 instead, to avoid references to non-metric measurements.
This comic features Cueball and his Cueball-like friend. The conversation takes place in Cueball’s basement. Cueball is apparently a less-experienced train modeler, and he tells his friend that he wants to make an HO model layout of his town. However, the more-experienced friend points out that this is a bad idea, due to nesting. To make it a perfectly accurate model, Cueball would have to include a model of his house, which includes his basement, which includes the model. So, he would have to make a model of the model, which will include a smaller model of the model, and so forth. This is illustrated in the comic. Real world examples of nested models include the Bourton-on-the-Water model village, which includes 4 levels of nested models. Artwork that includes a depiction of itself is known as the Droste effect.
At the end of these six nested models The Matryoshka limit is stated: "It is impossible to nest more than six HO layouts". Matryoshka dolls are toys of Russian origin that can be stacked inside one another. Here, the "Matryoshka limit" is the hard barrier that follows as a result of the nesting. Matter is not infinitely divisible; once one gets to the level of atoms, it is impossibly difficult to go any smaller. The unit shown in the last diagram is the ångström, a very small unit of measurement (1/10000th of a micrometre, 1/10 of a nanometre, 100 picometres or 10−10 m) which was created when humans started discovering objects on an atomic scale, such as crystal structures or wavelengths. The last nested model looks like the atoms on a surface as seen using a scanning tunneling microscope (STM).
The rules of model train layouts reference the 1999 cult classic Fight Club, where the first rule of Fight Club is "do not talk about Fight Club." However, while the club instituted the rule because their activities were morally and legally questionable, the rule in the comic was instituted by friends and family members who were apparently sick of hearing the train enthusiasts talk about model train layouts all the time. The second rule of Fight Club is "you do not talk about Fight Club", repeated for emphasis, but evidently Cueball and his friend are good enough at following the first rule of model train layouts that they only had to be told once.
The "Philistines" comment is not referring to citizens of ancient Philistia (at least not directly), but rather the philosophy of Philistinism. Friedrich Nietzsche defined a Philistine as someone who is purely negative in how they define style, i.e. they know exactly what they hate and don't really have anything they like. A common stereotype for artists is to refer to anyone who dislikes their work as "Philistines," thus dismissing their criticism as being part of a larger personality defect on the critic's part rather than any particular failing of the artwork in question.
The title text references HO scale and, more specifically, whether it should be spelled with the letter "O" or the number zero (0). Such debates often seem petty to the "layman", yet the people involved in the debates can form very strong feelings for their side. Randall recognizes "nerdy tendencies" almost immediately when he gets the urge to take a side.