I think sexual preoccupation is just saying that your mind is consistently thinking about sex and sexually related topics. So finding sexual innuendo in everything and making a lot of sex jokes would show a preoccupation with it - you bring it in to a lot of conversations where sex isn't the actual topic.

I don't think it's necessarily a bad thing at all, so I wouldn't worry about it. It's just an observation that your T has made. It's just that it's something that preoccupies you - as you explained about the massage train, you somewhat derailed the situation by your mind automatically thinking about sexual innuendos, so you brought it to others' minds.

Definitions of preoccupation:
pre·oc·cu·pa·tion

noun \(ˌ)prē-ˌä-kyə-ˈpā-shən\ : a state in which you give all your attention to something
: something that you give all or most of your attention to



Full Definition of PREOCCUPATION

1
: an act of preoccupying : the state of being preoccupied

2
a : extreme or excessive concern with something
b : something that preoccupies one