Thinking you would win would have your head in the clouds
(To have your head in the clouds is to have their head with unrealistic ideas. In which Waldo is saying Carmen winning would be unrealisitic.)
Cause you're battling someone who can blend with the crowd
(To blend in the crowd is not being different from the people around you however Waldo literally blends with the crowd in his series as the main goal is to find him in it.)
The best hider has been hired by the one and only Chief
(Waldo then says he is the better hider as he was hired by The Chief, the leader of ACME that hunts down Carmen.)
To stop the V.I.L.E. of a red fedora travelling thief!
(Vile is used in a double meaning of being evil and V.I.L.E. as in the evil group that Carmen leads. Carmen is also known for wearing a red fedora and travelling the world.)
I say this human Sly Cooper has a ton of flaws
(Waldo compares Carmen to another video game thief, Sly Cooper, as he says she has a ton of flaws.)
Maybe she should've learned from my rival, Odlaw
(Odlaw is the main villain in the Waldo series in which Carmen should learn from him to be a better hiding villain.)
You may have stolen treasures as a thief so globally
(Carmen Sandiego stole all sorts of treasures around the world however....)
But you should return to ACME as their Wild E. Coyote!
(...Before that, she was the top agent at ACME until she went rouge. Waldo suggests she should return to ACME as their test experiment similiar to Wild E. Coyote with ACME, another company with the same name, that creates all sorts of gadgets for Wild E. to get Road Runner but fail everytime.)
You're not stealing this rap as you probably acclaimed
(To Steal a rap is to dominate a rap battle in which it also references Carmen stealing treasures however Waldo says she's not gonna win this battle as she would've thought.)
Because nobody wants to play your educational games!
(Carmen Sandiego comes from Educational Games, a very unpopular type of games that usually aren't successfull in which Waldo says nobody will play Carmen's video games.)
Not even Death or Liam Neeson would know where i'm hiding
(Waldo then says he's so good at hiding that Death, a person who'll find you when you're about to die, and Liam Neeson, an actor known for his role in Taken who finds the people he loves through extreme measures, would know where Waldo is hiding.)
While you have little kids saying "Swiper No Swiping!"
(Meanwhile, Carmen Sandiego through her series is often stopped by kids similiar to how the Nickelodeon series, Dora The Explorer, Dora would stop the criminal fox known as Swiper with the saying "Swiper No Swiping!", basically Waldo is saying he is more badass and Carmen isn't due to the fact she gets stopped by children.)