It's a statement of disapproval and always used in a derogatory way to ridicule. The word "sad" is the disapproval in this context, "for words" puts emphasis on it to give a strong disapproval. It's quite common to hear people, or something that they are doing, called "sad". E.g: "Colin collects empty baked bean cans. How sad is that?". So basically Colin is being ridiculed because he collects empty baked bean cans.