Mr. Jones

    You walk into the room
    With your pencil in your hand
    You see somebody naked
    And you say, "Who is that, man?"
    You try so hard
    But you don't understand
    Just what you'll say
    When you get home
    Because something is happening here
    But you don't know what it is
    Do you, Mister Jones?

                    Bob Dylan

A dark and menacing-sounding song, "Ballad of a Thin Man" comments on a conventional "Mr. Jones", who walks into a room of intentionally bizarre counter-cultural types and doesn't "know what's happening". He is as clueless as Nick Charles, the lead character in the famous 1934 film The Thin Man, might have been if he had met Allen Ginsberg & Peter Orlovsky.
The "identity" of Mr. Jones has long been in dispute. When asked about it in an interview in 1965, Dylan responded:
"He's a pinboy. He also wears suspenders. He's a real person. You know him, but not by that name... I saw him come into the room one night and he looked like a camel. He proceeded to put his eyes in his pocket. I asked this guy who he was and he said, "That's Mr. Jones." Then I asked this cat, "Doesn't he do anything but put his eyes in his pocket?" And he told me, "He puts his nose on the ground." It's all there, it's a true story."
The opening lines of the song, "You walk into the room, with your pencil in your hand," appear to lend credence to the notion that "Mr. Jones" may have been a journalist. In a mid-1980s interview with Q magazine, Dylan appeared to identify Mr. Jones as Max Jones, a former Melody Maker critic, supporting the theory that "Mr. Jones" was simply one of the many music critics who didn't "get" Dylan's songs, especially the more allegorical ones he wrote in the mid-1960s. Another theory is that the Jones in question was Jeffrey Owen Jones (later a film professor at Rochester Institute of Technology). As an intern for Time Magazine, Jones had inteviewed Dylan just a day before the musician's legendary performance at the 1965 Newport Folk Festival. [This guy passed away in 2007. Read the report]
In Todd Haynes' 2007 surrealist Dylan biopic, I'm Not There, actor Bruce Greenwood plays "Keenan Jones", a journalist who doesn't understand the meaning behind the Dylan-esque character Jude Quinn's songwriting. In the film, Jones is sent through a hallucinatory nightmare sequence while Stephen Malkmus' cover of "Ballad of a Thin Man" plays in the background. Greenwood also plays Pat Garrett in the Richard Gere segment of the film.
It has also been speculated that the song is about Brian Jones, co-founder and guitarist of The Rolling Stones. Dylan was a friend of Jones and watched his lengthy downfall.
Apart from all of these possible Dylan-specific references, the term "Mr. Jones" is in general broadly understood as an allusion to the phrase "Keeping up with the Joneses" ¡ª a reference to the prototypical materialistic American family, so at odds with the outlook on life espoused by Dylan and the counterculture of the 1960s.
Another possible interpretation of the song is that it is about a man coming to grips with his own homosexuality. Several lyrics appear to reference phallic symbols ("He hands you a bone" "With your pencil in your hand" "A one-eyed midget") and there are possible allusions to fellatio ("Well, the sword swallower, he comes up to you / And then he kneels", "Here's your throat back, thanks for the loan") and transvestism ("He clicks his high heels") as well. In this interpretation of the song, some of the lyrics ("How does it feel to be such a freak"; "There ought to be a law / Against you comin' around") could allude to society's intolerance of homosexuality.
The song has also been interpreted as Dylan's ode to African Americans who were doing nothing during the turbulent Civil Rights movement.
Additionally, the line "There ought to be a law / Against you comin' around" bears much resemblance to a line of poetry from "Dream Song 4" by John Berryman, which says, "There ought to be a law against Henry." The Berryman poem was published, earlier, in 1959, and it is likely that Dylan may have had the poem in mind when he wrote this song. The Dream Song talks of Henry, who lusts after a woman he sees in a restaurant. The narrator/speaker in the poem is one "Mr. Bones."

Listern to the song in YouTube: