The singer tells of the battle between the British fleet and a flotilla of American barrels. As the barrels float downstream, the British fear they contain bombs or commandos, and blast the kegs to smithereens -- then boast of their victory
After the British took over Philadelphia during the Revolutionary War, the Colonials tried various expedients to harass their shipping. One of these was the use of what we would
now call floating mines -- kegs filled with gunpowder and intended to explode among the British ships.
The most intense combat of this sort took place in the winter of 1778. When the British saw a large number of kegs floating downriver, they naturally did all they could to explode them in advance (and, in fact, they were highly successful). The residents of Philadelphia, however, derived great amusement from watching the British attack a bunch of barrels. Hence this song. - RBW