There is no dispute that the expression means to pay an excessive amount for something. The origin is less clear. The Idioms Dictionary thinks it might come from the “nose tax” imposed in Ireland in the ninth century. Delinquent taxpayers were punished by having their noses slit. The Word Detective says it first appeared in the seventeenth century, and might equate being overcharged to being punched and given a nosebleed. “The theory is strengthened by the use of ‘bleed’ …to mean ‘cheat or defraud’.”