“It looks like you’re dressing him”

(Rachel walks into the diner and stares at them. Luke looks up and sees her.)
LUKE: Oh hi.
(Lorelai looks up and sees Rachel.)
LORELAI: Oh hi. Uh, this is not what it looks like.
RACHEL: It looks like you’re dressing him.
LORELAI: Then this is exactly what it looks like.

Rachel has already picked up that Luke has feelings for Lorelai, and has cleverly befriended Lorelai, perhaps partly to keep an eye on her, or to make Luke even more taboo for her. She cannot feel comfortable with Lorelai picking out clothes for Luke to wear, and helping him get dressed, as if she is already his wife.