A pocket dyke is a short lesbian. Usually taller people call people they are shorter to "pocket dyke". It can be used as an insult or joke. 5'3 or shorter is usually considered a pocket dyke with short hair and dresses like a boy.
Person 1: "Hey, look at that lesbian over there*
Friend: "yea she's a dyke"
Person 2: " just a short, cute little pocket dyke"
Friend: "I could just slide her into my pocket and walk around"