'As pleased as Punch' derives from a puppet character Mr. Punch. Punch and Judy shows, the popular summer-time entertainments on British beaches, have been somewhat in decline from the latter half of the 20th century onward, due to them being seen as politically incorrect. That's hardly surprising as the main character Punch is a wife-beating serial killer! Read more about this weirdly fascinating puppet show and origin of the phrase here.
The phrase means someone who is very pleased.