“If someone wants to smoke in the privacy of their own home, hey, knock yourself out. But other people shouldn't have to breathe that in while they're trying to enjoy a meal.”
You are not a smoker. You go to a restaurant that allows smoking, and the smell is very unpleasant. You complain to your friend that smoking shouldn't be allowed in restaurants.
If someone wants to smoke in the privacy of their own home, hey, knock yourself out. But other people shouldn't have to breathe that in while they're trying to enjoy a meal.
This phrase means to do something when you're at home, and other people aren't around. People use this phrase to talk about whether it's OK to do something. For example:
If someone wants to do drugs in the privacy of their own home, I don't see why the government should try to stop them.
You can also use this phrase if you want to talk about something that's OK at home but not in public:
I don't care what you do in the privacy of your own home, but you'd better watch what you say at work.
Sometimes in English we use "hey" like this:
If you want to vote for him, hey, that's your decision.
The meaning of this is something like "I disagree with you, but I can't do anything about it." Here is another example:
Hey, you're an adult now. If you want to spend all your money on useless junk, I can't stop you. But don't come asking me for money when you run out.
If you tell someone to "knock yourself out", it means "do it". For example:
A: Can I try it?
B: Yeah, knock yourself out.
One way to use this phrase is to tell someone to do something that you actually don't think is a good idea. For example, imagine that you're selling something. A customer thinks that she can find a better price somewhere else. You don't think she can. So you can say:
If you think you can find a better price elsewhere, knock yourself out.
You might have strong opinions about who should do something. If so, you can use this phrase:
I shouldn't have to clean up your mess.
Taxpayers shouldn't have to pay for stuff like that.
Use the phrase "breathe ___ in" to talk about something that enters your body when you breathe.
The fumes are toxic. Be careful not to breathe them in too much.
We mostly use this phrase to talk about breathing in negative or harmful things, but you can also "breathe in" something good:
I love going out into the mountains and breathing in that fresh mountain air.
To "enjoy a meal" means to eat food in a relaxed situation.
People sometimes use this phrase to talk about something that spoiled or interrupted their relaxed meal:
I was enjoying a meal with my family when the phone suddenly rang. It was one of those annoying telemarketers.