This passage deals with the actual roasting of the Pesach offering. The Mishnah opens with a question: how did they roast the Pesach offering? It answers that they would bring a spit of pomegranate wood - a long wooden rod made from a pomegranate tree.
Why specifically a spit of pomegranate wood?
Wood and not metal - metal becomes very hot, whereas the Pesach offering must be roasted by the heat of the fire and not by the heat of the metal, even if the metal was heated by the fire.
Pomegranate and not other kinds of wood - other kinds of wood, even when they are dry on the outside, tend to give off moisture. That moisture heats up, and the result is a kind of cooking - and the Pesach offering may not be cooked in liquid, only roasted. Pomegranate wood is dry inside and out, and therefore it was chosen for this purpose.
How the spit was inserted:
They would drive the spit in "mitoch piv ad beis nekuvaso" - from its mouth to its anus. Even though the innards had been removed, the lower opening still remained, and they would drive the spit through it. The head was placed facing downward, and since the thick part of the wood was at the bottom, near the mouth and the head, the offering would not slip off.
The legs and the innards:
The legs that had been cut off and the innards that had been cleaned and thoroughly rinsed would be placed inside the animal. The removal of the legs was done without breaking any bones, for one may not break a bone of the Pesach offering; rather, they would cut at the joint.
Placing the legs and the innards inside the offering during the roasting is the opinion of Rabbi Yosi HaGelili, and Rabbi Akiva disagrees with him:
Rabbi Yosi HaGelili: the legs and the innards are placed inside the animal, and they are roasted together with it.
Rabbi Akiva: this is a kind of cooking, since the liquids heat up within the cavity in the manner of cooking in a pot. Therefore, "tolin chutzah lah" - they hang them on the spit on the outside, and in this way they are roasted.
In summary: in this passage we learned how the Pesach offering was roasted: on a spit of pomegranate wood specifically, which is not metal that heats up and does not give off moisture that would bring about cooking; the insertion of the spit from the mouth through to the anus, with the head facing downward; and the handling of the legs and the innards - without breaking a bone - regarding which Rabbi Yosi HaGelili, who places them inside the animal, and Rabbi Akiva, who hangs them outside it out of concern for cooking, disagree.