Primarily because I just played Donovan's Atlantis (Update: So I followed through and checked out the flick).

That tune provides the aural backdrop to the vicious beating that Tommy DeVito (Joe Pesci) administers to Billy Batts (Frank Vincent*) in the Suite Lounge bar after Billy, a made guy, insulted him ("Now go home and get your fuckin' shine box.")

* Vincent had a role as New York mob boss Phil Leotardo in the recently-concluded HBO series The Sopranos. He got whacked there, too. :)  Lorraine Bracco, wife of Henry Hill (Ray Liotta) in Goodfellas, of course had a long-running role in the series as Dr. Jennifer Melfi, shrink to Tony Soprano. Michael Imperioli, the unfortunately defiant Spider in Goodfellas, also had a major Sopranos rols.

"Wa-a-a-a-a-y do-w-w-w-n-n-n, bee-l-o-w-w-w the ocean/Whe-r-r-r-r-e/I wanna be/she may be" wails the eerie chorus of the one-time hippy anthem as Tommy pounds Billy to a literal bloody pulp (he got some help from the feet of Jimmy Conway [Robert DeNiro]  while Henry stood guard). The combination of brutal violence and dreamy music is really, really nightmarish.

Addendum: Here's the YouTube clip

In an article on 35mm Jukebox, Phil Dellio put that scene at number eight on the 20 best uses of pop music in a Martin Scorsese movie.

That scene is presaged by this exchange between Tommy and Henry at the Bamboo Lounge where they're hanging out with their fellow wiseguys, the classic "what do you mean I'm funny?" soliloquy, found here. If you're lazy, here's the text:

Henry: (Laughing)  "You're really funny. You're really funny." Tommy: (Laugh trailing off) "What do you mean I'm funny?" Henry: "It's funny, you know. It's a good story. It's funny. You're a funny guy." Tommy: (Mildly wounded) "What do you mean? The way I talk?" Henry: (Awkwardly) "It's just, you know, you're just funny. You know, the way you tell the story and everything." Tommy: (Mildly aggressive) "Funny how? I mean, what's funny about it?" (table quiets) Anthony: "Tommy, you got it all wrong..." Tommy: "Whoa whoa whoa, Anthony; he's a big boy, he knows what he said. What'd you say? Funny how?" Henry: (Flailing, plaintively) "It's ... You know, you're funny." Tommy: (Leaning into him slightly, ominous tone) "You mean - lemme understand this, cause I don't know. Maybe it's me - I'm a little fucked up maybe. But, I'm funny how? Funny like a clown? I amuse you? I make you laugh? I'm here to fuckin' amuse you? What do you mean funny? Funny how? How am I funny?" Henry: (helplessly) "It's just ... You know, how you tell the story. What?" Tommy: (Aggressively, but trying to maintain a straight face) "No, no, I don't know. You said it. How do I know? You said I'm funny. How the fuck am I funny? What the fuck is so funny about me? Tell me. Tell me what's funny!" Henry: (Long pause, wary look, raises hands) "Get the fuck outta here, Tommy ..." Tommy: (Laughing, wagging his finger) "You motherfucker! I almost had him! I almost had him! You stutterin' ... You stutterin' prick, ya! Frankie, was he shakin'?! I wonder about you sometimes, Henry. You may fold under questioning!"

Addendum: Here's the YouTube clip

Comedian Richard Belzer did a very funny take/homage on/to that sequence in the 1990s TV series Homicide: Life on the Street.

Tommy was just fuckin' with Henry, as the phrase goes. However, you could see Henry getting stressed because with Tommy, something so minor could literally become life and death business.

On the DVD commentary track, the real Henry Hill said of the real Tommy: "You had to be in constant fear around Tommy. He was capable of whacking anybody at any time. Even me. ... He was a sick fuck."

Things did turn deadly serious when Tommy got into a feud with Spider, the kid who ran drinks at their card game, and shot him to death after Spider -- in exasperation from Tommy's ragging on him, not to mention having previously shot him in the foot -- told him to go fuck himself.

Not one of the guys at the card table seemed to really think there was anything seriously wrong with the killing, least of all Tommy. They squabbled over who would bury the body.

Part of Goodfellas' genius was the arc of the story. Early on in the movie, you see the seductive, exciting side of gangster life. There's a reason why Dellio picked the scene where Henry and Karen (Lorraine Bracco) enter the Copacabana to the Shirelles' And Then He Kissed Me as his number one use of a pop tune.

By the end, you see these guys as the thuggish, grasping, lying, treacherous scum that they really are.

However, they are cinematically indelible scum, in part because of Scorsese's superlative blend of music and image combined with some brilliant performances.

Bonus

This Brokeback Mobsters video is hilarious!