The Kinks 'Lola' Live.
This song is about a transvestite. According to a 2004 piece in Rolling Stone magazine, it may have been inspired by the famous transvestite Candy Darling, who Kinks lead singer Ray Davies allegedly dated for a brief time. This is the same Candy mentioned in Lou Reed's "Walk On The Wild Side" ("Candy came from out on the island, in the backroom she was everybody's darling").
The other possibility, which is stated in The Kinks: The Official Biography, is that Ray Davies wrote the lyrics after their manager got drunk at a club and started dancing with what he thought was a woman. Toward the end of the night, his stubble started showing, but their manager was too tanked to notice. (thanks, Martin - Rostock, Germany)