What does "not the sharpest tool in the shed" mean — and why is it funny?

informal, humorous

Meaning

A gentle, jokey way of saying that someone is not very intelligent.

Where it comes from

One of a large family of 'not the brightest / sharpest...' comparisons that spread through American and British English in the late twentieth century.

Why it is funny

The humor is in the politeness of the insult. It never says 'stupid' out loud — it simply places the person in a shed full of sharper tools and lets you do the arithmetic yourself. The speaker stays innocent while the listener does the rude part.

Used in a sentence

"He's a lovely man, but not the sharpest tool in the shed."