Johnny and Ponyboy got jumped by the Socs, and Johnny had stabbed and killed one. This caused them to go into hiding. You're staying with them since you were involved in the attack. And they are changing their hair. Ponyboy is dying his hair blonde, and Johnny is cutting it. You're helping him cut his hair.

"Go on. Get your jollies."

Johnny says with a chuckle as he hands you his switchblade to cut his hair.