... So did Kyon just mention his dick out of nowhere, or do the two panels before mean anything?

She's wondering what that is in the second panel.

The bulge under the blankets suggests Kyon is putting her hand on her pingas.

Therapeutic massage?

Roman said:
The bulge under the blankets suggests Kyon is putting her hand on her pingas.

In the second panel he's pulling her hand towards him (which is why she has the confused look on her face), and then in the third one he puts it on his dick under the covers.