The One With Phoebe's Dad - S2-E9
Continuity mistake: In the scene where Monica and Ross walk in carrying a few carrier bags, Monica takes out a pack of green plates, but in the next shot she is holding 4 packs of plates - 2 green, 2 red. She did not have time to pick up another pack between shots. (00:08:05)
Answer: Usually by the seventh night of Hanukkah you don't know what to get the other person, and you will probably resort to getting the other person something insignificant. Chandler is basically saying that the pen is a stupid gift.