The One with the Blackout - S1-E7
Trivia: The scene where Rachel is on the balcony is the only scene in Friends in which Monica, Joey, Phoebe and Ross ALL appear together without Rachel and Chandler. Chandler was at the ATM vestibule, and Rachel was on the balcony. This scene begins with Phoebe singing "New York City has no power..."
Answer: The statements that she's contradicting (that it is common, it happens to every guy, and it's not a big deal), are the things that a woman commonly says to a man who is suffering from erectile difficulty, typically to assuage his bruised ego. However, most men do not believe that these statements are true, as evidenced by Chandler's outburst. He's so caught up in the proof that women are lying about it that he gives himself away.
Rooster of Doom