The Dutch Lobster is not a sexual act, it's a Lobster from Holland. However, it sounds like a sexual act, at least to British and American ears.
The joke is asking someone if they know what a 'Dutch Lobster' is, and laughing as they explain the most lurid sexual act they can think of.
The term was coined by Simon Travaglia as part of his satirical column 'BOFH' on The Register website in 23rd September 2005
"What the hell's a Dutch lobster?" the Boss asks.
"You've not travelled, have you?" the friend sighs, shaking his head.