The speaker is watching someone they once cared about, or perhaps still care about, turn his attention to another girl. It used to be the speaker he looked at, and now it's "her" again. The speaker seems to be talking to him directly, while also reporting what the other girl has said: she isn't interested. Even so, the speaker offers to step back and be the "supportive friend," admitting that the two of them "were never meant to be."
What stands out is how much she tries to hold in. She tells him to be happy, promises not to worry him, and says she'll keep smiling even when she's exhausted. The line "Fix her heart, I'll fix my own" shows that she is hurting too, though she keeps it quiet. The last line gives her away: she can only keep up the act if he doesn't look her in the eye. The mood is gentle, wistful and quietly sad, a kind of generous heartbreak where selflessness is covering real pain.