The speaker was walking around through the hills and valleys, but he felt all lonely and mopey. Suddenly, as he passed a lake, he noticed a big group of yellow daffodils waving in the breeze. This wasn't just some scattered patch of daffodils. We’re talking thousands and thousands around this particular bay. And all these flowers were dancing.
Yes, the daffodils danced, and so did the waves of the lake. But the daffodils danced better. The speaker’s loneliness was replaced by joy, but he didn't even realize what a gift he has received until later. Now, whenever he’s feeling kind of blah, he just thinks of the daffodils, and his heart is happily dancing.