How are to understand this: I know it can not literal. Rabbi Eidensohn of the Da'at Torah blog posted the following excerpt from the Shulkhan Arukh, Even HaEzer 21:7, this morning:
Therefore a father is permitted to hug his daughter and to kiss her as well as to sleep in bed with her while their naked bodies are in contact. This is also permitted for a mother with her son – as long as they are children. When they grow up and the son is considered an adult [at 13 years and a day] and the daughter grows until she has breasts and pubic hair (Yechezkeil 16:7) – they can no longer sleep with their parents and have their naked bodies in contact – but they can only sleep together while clothed. However if the daughter is embarrassed to stand naked before her father or if she is engaged to be married or if the mother is embarrassed to stand naked before her son – even if they are still children – once the nudity causes embarrassment then they can only sleep together while clothed.