The One The Morning After - S3-E16
Revealing mistake: In the shot where Monica and Phoebe are taking off the wax strips, they make a big fuss about how much it hurts. However, watch carefully and you will see one of the strips just fall off. (00:10:30)
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.