It seems that Diogenes Laertius' passageDiogenes Laertius' passage is not often commented into Socrates' literature.
If we try with different translations, we may say that Socrates recommends to take care of appearance:
"for handsome young men, to behave according to their appearance (i.e. to be virtuous ?), while for ugly men to hide their defects (the physical ones) with an educated behavior".
What is the "meaning" of this quote?
Is Socrates speaking about beauty or about virtue ?
Maybe about the importance of "proper behavior" for social relationships...
We have also to consider that Diogenes lived in 3rd century AD, around 600 years afetr Socrates' life: thus, without context and without further evidence about the correct attribution of the quote to Socrates, it is hard to speculate about it.