Rhyming slang is a peculiarly English type of slang. More specifically, it originates in London, and is based on rhyme, though new words in rhyming slang are now coined all over the English-speaking words, and many terms have now entered the mainstream language (such as "berk", "porkies", and so on).
To construct a new term is simple; to understand one without knowing its origin can be a little more tricky.
- Begin with the meaning you want, for example, "head"
- Find a word, or better, a phrase that rhymes with it. Here, it's "loaf of bread".
- Truncate the phrase. In other words, remove the part that rhymes so the origin is obscured: "loaf"
So "porkies" is "porky pies", "lies"; "butcher's" is "butcher's hook", "look".
See also Wikipedia.