It's not good when you have to explain a joke, but this is a classic German joke. It relies on the fact that the German word for "shark" is pronounced "hi".
Try telling the joke to a German. Leave out the word "German" as you tell it to them.
Two fish meet in the ocean. One says to the other "Hi". The other turns pale and says "Where?".
It is funny watching the German person laugh, and then suddenly realize that the joke makes no sense in English.
