Rosencrantz and Guildenstern meet with Hamlet, and try to convince him to give up Polonius' body, which Hamlet has hidden.
Hamlet points out that Claudius' little helpers are like a sponge: they're soaking up Claudius' favors now, but Claudius is sure to wring them dry again as soon as he's done.
Rosencrantz doesn't get it, which suits Hamlet just fine.
They ask him again where the body is, and Hamlet answers with a riddle. He says "the body is with the king, but the king is not with the body" (4.2.27-28). This is a reference to a law that says the king has the right to enforce the laws, but that the laws don't just go away when the king dies.
Hamlet starts to explain himself, but he trails off, leading Guildenstern to interrupt. This probably exactly what Hamlet wanted, because it lets him deliver the punchline that the king is nothing—nothing at all. Not a king, not a ruler, maybe not even alive when Hamlet's through with him. Then Hamlet runs off, like a kid playing tag.