Lyric discussion by mnemonicrhyme 

Cover art for Lulliby lyrics by Regina Spektor

I think the song is about someone who lost someone they love, but they both still care about each other.

The line "If you often smile but often don't smile Which do you do more often Smile or not?" shows the uncertainty of the other person in the relationship as to whether or not they want to be in the relationship.

I always interpreted the toenails changing colour as a sign of aging and time passing by, because I've noticed the older people are the yellower their toenails appear. I do find the citylife/nail polish interpretation interesting as well.