It all means that God alone is real, and all else is illusion.
Continuing, Baba said:
There is Paramatma. He is all-existing. All atmas [souls] are in Paramatma. All atmas are Paramatma. When an atma apparently comes out of Paramatma, it is the jivatma [individual embodied soul] and begins to gain consciousness of falseness. For the jivatma to become one with Shivatma [God, the Supreme Soul] is the goal. After passing through the process of evolution, reincarnation and involution, the jivatma eventually becomes Shivatma and remains so eternally.
When Shivatma comes down to normal consciousness in duality [illusion], that is, when Shivatma is duality-conscious, he is nar [man] and Narayan [God] simultaneously. So the soul that thus regains normal [gross] consciousness in duality should be called Jiv-Shivatma . This boils down to the fact that the atma has to go through hell, reincarnating time and time again, in order to become Self-conscious. To become Self-conscious is to experience the "I-Am-God" state consciously and continuously. After becoming Shivatma, there is the state of baqa. Such a Shivatma in the state of baqa is termed Purushuttam. ( Purush plus uttam equals the Supreme Being, the Best of Man.)
Atma is purush [man]; prakruti [duality, maya] has come out of Nothing. Purush and prakruti are linked eternally until Purush releases himself from prakruti and becomes Self-conscious. The majzoob of the seventh plane is Shivatma. The Avatar is Shiv-Jivatma , the Param-Purush , the Highest of the High, or the Beloved and Eternal Man.
Baba ended the discourse with this remark, "Whatever I say is what I know ; but to you all these are only words!"
Baba then asked Bachoobhai to sing. Just as he finished, Haribhai Patel of Bajwa arrived, dancing in ecstasy, and he too began singing. He fell at Baba's feet with tears streaming down his cheeks. Baba embraced each of his Bajwa lovers, and then retired for the day.
The next morning, Sunday, 2 June 1963, a large group of people had gathered by 7:30 A.M. Baba sat in the assembly hall and embraced those from Andhra. Afterwards, bhajans were sung by the Navsari group, followed by ghazals by Mohan-Saigal of Bombay.
Baba commented, "On the path, 100 percent honesty is required. The least hypocrisy washes you away from the shore of Reality. God never manifests in hearts that are unclean. But to have a clean heart is impossible without the grace of a Perfect Master."