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I remember seeing somewhere that the ped interactions was one of the things that they were able to achieve on the newer engine of Saints Row 2.
Some people might look at this and be like "Big deal, they're just cuddling.. I don't see the point.." and they're right, there is no point. In Saints Row 1 if the peds got this close, they'd both fly off in different directions. GTA doesn't have peds cuddling like this, you get two of them this close and they'll likely just start beating each other.
But that's the thing that makes this special, it's the small little touches like this that make the game more believable and enjoyable.