Quote from GOF

[jeanico2000]

No: HPFGUIDX 56784

"You stand, Harry Potter, upon the remains of my late father", he 
hissed softly, "A muggle and a fool...very like your dear mother..."
I was just reading GOF again to refresh my memory and get ready to 
move on to OOTP and came across this sentence that Voldemort speaks 
to Harry in the graveyard. Why does he compare Lily to his father? 
was Lily a muggle? I thought Harry's parents were a wizard and a 
witch. Any thoughts on this? Maybe I am just not understanding the 
quote properly.
Nicole