Śrīmad-Bhāgavatam is the narration of the svarūpa of the Lord manifested by His internal potency, and this potency is distinguished from the external potency which has manifested the cosmic world, which is within our experience. Śrīla Vyāsadeva makes a clear distinction between the two in this śloka. Śrī Vyāsadeva says herein that the manifested internal potency is real, whereas the external manifested energy in the form of material existence is only temporary and illusory like the mirage in the desert. In the desert mirage there is no actual water. There is only the appearance of water. Real water is somewhere else. The manifested cosmic creation appears as reality. But reality, of which this is but a shadow, is in the spiritual world. Absolute Truth is in the spiritual sky, not the material sky. In the material sky everything is relative truth. That is to say, one truth depends on something else. This cosmic creation results from interaction of the three modes of nature, and the temporary manifestations are so created as to present an illusion of reality to the bewildered mind of the conditioned soul, who appears in so many species of life, including the higher demigods, like Brahmā, Indra, Candra, and so on. In actuality, there is no reality in the manifested world. There appears to be reality, however, because of the true reality which exists in the spiritual world, where the Personality of Godhead eternally exists with His transcendental paraphernalia.
The chief engineer of a complicated construction does not personally take part in the construction, but he knows every nook and corner because everything is done under his direction. He knows everything about the construction, both directly and indirectly. Similarly, the Personality of Godhead, who is the supreme engineer of this cosmic creation, knows every nook and corner, although affairs are being carried out by demigods. Beginning from Brahmā down to the insignificant ant, no one is independent in the material creation. The hand of the Lord is seen everywhere. All material elements as well as all spiritual sparks emanate from Him only. And whatever is created in this material world is but the interaction of two energies, the material and the spiritual, which emanate from the Absolute Truth, the Personality of Godhead, Śrī Kṛṣṇa. A chemist can manufacture water in the chemical laboratory by mixing hydrogen and oxygen. But, in reality, the living entity works in the laboratory under the direction of the Supreme Lord. And the materials with which he works are also supplied by the Lord. The Lord knows everything directly and indirectly, and He is cognizant of all minute details, and He is fully independent. He is compared to a mine of gold, and the cosmic creations in so many different forms are compared to objects made from the gold, such as gold rings, necklaces and so on. The gold ring and the gold necklace are qualitatively one with the gold in the mine, but quantitatively the gold in the mine is different. Therefore, the Absolute Truth is simultaneously one and different. Nothing is absolutely equal with the Absolute Truth, but at the same time, nothing is independent of the Absolute Truth.
Conditioned souls, beginning from Brahmā, who engineers the entire universe, down to the insignificant ant, are all creating, but none of them are independent of the Supreme Lord. The materialist wrongly thinks that there is no creator other than his own self. This is called māyā, or illusion. Because of his poor fund of knowledge, the materialist cannot see beyond the purview of his imperfect senses, and thus he thinks that matter automatically takes its own shape without the aid of a superior intelligence. This is refuted in this śloka by Śrīla Vyāsadeva: "Since the complete whole or the Absolute Truth is the source of everything, nothing can be independent of the body of the Absolute Truth." Whatever happens to the body quickly becomes known to the embodied. Similarly, the creation is the body of the absolute whole. Therefore, the Absolute knows everything directly and indirectly that happens in the creation.