"A cross-eyed hare mowed with a crooked scythe."
косой: adjective, "crooked, skewed, leaning, cross-eyed"
косой: nominalised adjective, same meaning, a folk epithet for a hare
"Cross-eyed one" is what a hare may be called in a fairytale, or in hunters' banter.
How do the two "cross-eyed"s in a row work? Compare (for lack of a better example I can immediately think of): "a forsaken Forsaken wandered about". (The second time referring to the race from the Warcraft universe.) Or, "Gollum grabbed his precious precious".
косил: "mowed, was mowing"
косой: same adjective as before, this time in feminine instrumental
косой: instrumental of коса, "scythe"
It's a popular joke commenting on the opacity, and overlapping, of Russian grammatical endings, but it usually doesn't have the hare in it, because it starts to get a little bit too contrived. The version I grew up with is косил косой косой косой "a cross-eyed [person] mowed with a crooked scythe".