Material energy has the power to cover knowledge, but this covering cannot be applied to the Supreme Personality of Godhead. It is applicable only to the prajāḥ, or those who are born with material bodies, the conditioned souls. The different kinds of living entities vary according to the modes of material nature, as explained in Bhagavad-gītā and other Vedic literature. In Bhagavad-gītā (BG 7.12) it is very nicely explained that although the modes of goodness, passion and ignorance are born of the Supreme Personality of Godhead, He is not subject to them. In other words, the energy emanating from the Supreme Personality of Godhead cannot act on Him; it acts on the conditioned souls, who are covered by the material energy. The Lord is the father of all living entities because He impregnates material energy with the conditioned souls. Therefore, the conditioned souls get bodies created by the material energy, whereas the father of the living entities is aloof from the three modes.
It is stated in the previous verse that the material energy was accepted by the Supreme Personality of Godhead in order that He might exhibit pastimes for the living entities who wanted to enjoy and lord it over the material energy. This world was created through the material energy of the Lord for the so-called enjoyment of such living entities. Why this material world was created for the sufferings of the conditioned souls is a very intricate question. There is a hint in the previous verse in the word līlayā, which means "for the pastimes of the Lord." The Lord wants to rectify the enjoying temperament of the conditioned souls. It is stated in Bhagavad-gītā that no one is the enjoyer but the Supreme Personality of Godhead. This material energy is created, therefore, for anyone who pretends to enjoy. An example can be cited here that there is no necessity for the government's creation of a separate police department, but because it is a fact that some of the citizens will not accept the state laws, a department to deal with criminals is necessary. There is no necessity, but at the same time there is a necessity. Similarly, there was no necessity to create this material world for the sufferings of the conditioned souls, but at the same time there are certain living entities, known as nitya-baddha, who are eternally conditioned. We say that they have been conditioned from time immemorial because no one can trace out when the living entity, the part and parcel of the Supreme Lord, became rebellious against the supremacy of the Lord.
It is a fact that there are two classes of men—those who are obedient to the laws of the Supreme Lord and those who are atheists or agnostics, who do not accept the existence of God and who want to create their own laws. They want to establish that everyone can create his own laws or his own religious path. Without tracing out the beginning of the existence of these two classes, we can take it for granted that some of the living entities revolted against the laws of the Lord. Such entities are called conditioned souls, for they are conditioned by the three modes of material nature. Therefore the words guṇair vicitrāḥ are used here.
In this material world there are 8,400,000 species of life. As spirit souls, they are all transcendental to this material world. Why, then, do they exhibit themselves in different stages of life? The answer is given here: they are under the spell of the three modes of material nature. Because they were created by the material energy, their bodies are made of the material elements. Covered by the material body, the spiritual identity is lost, and therefore the word mumuhe is used here, indicating that they have forgotten their own spiritual identity. This forgetfulness of spiritual identity is present in the jīvas, or souls, who are conditioned, being subject to be covered by the energy of material nature. Jñāna-gūhayā is another word used. Gūhā means "covering." Because the knowledge of the minute conditioned souls is covered, they are exhibited in so many species of life. It is said in the Śrīmad-Bhāgavatam, Seventh Chapter, First Canto, "The living entities are illusioned by the material energy." In the Vedas also it is stated that the eternal living entities are covered by different modes and that they are called tricolored—red, white and blue—living entities. Red is the representation of the mode of passion, white is the representation of the mode of goodness, and blue is the representation of the mode of ignorance. These modes of material nature belong to the material energy, and therefore the living entities under these different modes of material nature have different kinds of material bodies. Because they are forgetful of their spiritual identities, they think the material bodies to be themselves. To the conditioned soul, "me" means the material body. This is called moha, or bewilderment.
It is repeatedly said in the Kaṭha Upaniṣad that the Supreme Personality of Godhead is never affected by the influence of material nature. It is, rather, the conditioned souls, or the minute infinitesimal parts and parcels of the Supreme, who are affected by the influence of material nature and who appear in different bodies under the material modes.