Desfolhou is from the verb desfolhar, meaning "to shed leaves or petals." It is a wonderfully descriptive and poetic word that you won't encounter in everyday conversation.
In the song, the narrator dances so many turns (Tantas voltas dei bailando) that the rose on her chest sheds all its petals (Que a rosa se desfolhou). This creates a beautiful and poignant image of something delicate coming apart from pure, joyful exertion, perhaps symbolizing a loss of innocence or the fleeting nature of a perfect moment.
This song feels like a traditional folk tale set to music. The singer starts by telling us about a dance: "Rosa ao peito na roda / Eu bailei com quem calhou" (Rose on my chest in the circle / I danced with whoever was there). She danced so much that her rose fell apart, which is a beautiful way to talk about losing a bit of yourself, or maybe your innocence, in the heat of the moment.
Then the song shifts into giving advice, repeating the line "Quem tem, quem tem amor a seu jeito / Colha a rosa branca, ponha a rosa ao peito" (Whoever has love their own way / Pick the white rose, put it on your chest). It's a call to cherish the love that's right for you. But the most direct part comes when the singer asks a very simple, cutting question to someone she fancies: "Se de rosas gostas tanto / Por que não gostas de mim?" (If you like roses so much / Why don't you like me?). It's a wonderfully blunt expression of feeling overlooked, comparing herself to a flower to ask why she isn't loved too.