It's rude to disregard or refuse compliments.
Dave is at the bar ordering a drink when the bartender tells him he's really good looking.
Dave wants to respond to the compliment.
Dave tells the bartender that she's really being nice and that he's flattered by her nice words.
Dave tells the bartender that she's just flattering him and that he knows for a fact he's not especially attractive.
The bartender is happy that Dave received her compliment well and that he seems happy about it.
The bartender is shocked and insulted at the insinuation that she's lying and feels Dave is pathetic.