You should not talk about another person's children.
Wilson talks to his wife about those no good Smith kids and their son (who is friends with those kids) overhears.
Wilson wants to explain to his son.
Wilson realizes what he was doing was wrong and apologizes to his son.
Wilson fabricates a story about a different Smith from work who is not one of his son's friends.
Their son thanks him for the apology and heads back to his room.
Their son points out that talking behind people's backs about people is wrong no matter who it is.