You can interpret this as a literal story or as something more abstract, and I think the Cave intended a bit of both. Some other commenters have done pretty good work on the narrative, so here's what I think about the more abstract side of things.
At the start of the song we are introduced to "Little Janie" (emphasizing her youth and vulnerability) waking from a dream (childhood?). The "gun like a jawbone down the waistband of her jeans" links violence and destruction with the power of sex (note the play in words with the phrase "jawbone of an ass" later on). Contrasted with this is Mr. Sandman, who "can recite today's lesson in his sleep", suggesting the extent to which he has been shaped and taught by society. What is "today's lesson"? In the second verse we get a partial answer -- "something about the corruption of the working class"... There's a pretty clear dichotemy here, where Janie represents innocence and Mr. Sandman cynicism and corruption, and their association suggests the inevitable loss of innocence that comes with adulthood.
The bridge serves to connect the song in more ways than one. With the use of the first person plural "we", the lyrics emphasize that Little Janie and Mr. Sandman are stand-ins for the listener, personifications of aspects of the human condition. These lines emphasis the power of desire -- "we are all such a crush of want", etc. The phrase "We are violated in our sleep" perhaps alludes to emerging sexuality in dreams, and connects back to the loss of childhood innocence in the first verse. Later lines elaborate on the role society plays in this process: "we are pimped, we are bitched / we are told such monstrous lies". We are all exploited and lied to by society, literally or figuratively. Something potentially positive, sex, is transformed into something exploitative, prostitution, by the influence of greed and dishonesty.
The last verse, probably the most intense, describes the link between Mr. Sandman and Janie. Mr. Sandman likes to see Janie sleeping (innocent and vulnerable), and he "digs her pretty knees and that she is completely naked underneath all her clothes" -- again, this nakedness suggests vulnerability, as well as sexual attractiveness. These lines suggest the allure that youth and has for the older, more experienced and cynical members of society. And the result is that "Mr. Sandman the inseminator, he opens her up like a love-letter and enters her dreams". This can be understood on at least three levels. First, sexual -- "Mr. Sandman the inseminator [...] opens her up [...] and enters her" -- a direct reference to sexual intercourse. Second, societal - Mr. Sandman as the corrupting influence of society now "enters [Janie's] dreams". And finally, personal - Mr. Sandman is the force of sexual desire within Janie, which acts as the "inseminator" (think fertility, vitality) that "opens [Janie] up like a love letter" -- bringing what was formerly latent and secret out into the world -- and "enters her dreams" as adult desire and awareness.
And what is Janie's response to all this? "We're gonna have a real cool time tonight."... I'll let you draw your own conclusions.
You can interpret this as a literal story or as something more abstract, and I think the Cave intended a bit of both. Some other commenters have done pretty good work on the narrative, so here's what I think about the more abstract side of things.
At the start of the song we are introduced to "Little Janie" (emphasizing her youth and vulnerability) waking from a dream (childhood?). The "gun like a jawbone down the waistband of her jeans" links violence and destruction with the power of sex (note the play in words with the phrase "jawbone of an ass" later on). Contrasted with this is Mr. Sandman, who "can recite today's lesson in his sleep", suggesting the extent to which he has been shaped and taught by society. What is "today's lesson"? In the second verse we get a partial answer -- "something about the corruption of the working class"... There's a pretty clear dichotemy here, where Janie represents innocence and Mr. Sandman cynicism and corruption, and their association suggests the inevitable loss of innocence that comes with adulthood.
The bridge serves to connect the song in more ways than one. With the use of the first person plural "we", the lyrics emphasize that Little Janie and Mr. Sandman are stand-ins for the listener, personifications of aspects of the human condition. These lines emphasis the power of desire -- "we are all such a crush of want", etc. The phrase "We are violated in our sleep" perhaps alludes to emerging sexuality in dreams, and connects back to the loss of childhood innocence in the first verse. Later lines elaborate on the role society plays in this process: "we are pimped, we are bitched / we are told such monstrous lies". We are all exploited and lied to by society, literally or figuratively. Something potentially positive, sex, is transformed into something exploitative, prostitution, by the influence of greed and dishonesty.
The last verse, probably the most intense, describes the link between Mr. Sandman and Janie. Mr. Sandman likes to see Janie sleeping (innocent and vulnerable), and he "digs her pretty knees and that she is completely naked underneath all her clothes" -- again, this nakedness suggests vulnerability, as well as sexual attractiveness. These lines suggest the allure that youth and has for the older, more experienced and cynical members of society. And the result is that "Mr. Sandman the inseminator, he opens her up like a love-letter and enters her dreams". This can be understood on at least three levels. First, sexual -- "Mr. Sandman the inseminator [...] opens her up [...] and enters her" -- a direct reference to sexual intercourse. Second, societal - Mr. Sandman as the corrupting influence of society now "enters [Janie's] dreams". And finally, personal - Mr. Sandman is the force of sexual desire within Janie, which acts as the "inseminator" (think fertility, vitality) that "opens [Janie] up like a love letter" -- bringing what was formerly latent and secret out into the world -- and "enters her dreams" as adult desire and awareness.
And what is Janie's response to all this? "We're gonna have a real cool time tonight."... I'll let you draw your own conclusions.