This verse is very important for an understanding of how the living entities transmigrate from one body to another. It is explained in the Second Chapter, "vasansi jiranani yatha vihaya...", the living entity is transmigrating from one body to another just as one changes dress. This change of dress is due to his attachment to material existence. As long as he is captivated by this false manifestation, he has to continue transmigrating from one body to another. Due to his desire to lord it over material nature, he is put into such undesirable circumstances. Under the influence of material desire, the entity is born sometimes as a demigod under mode of passion, sometimes as a saintly human under influence of the mode of goodness, sometimes under the influence of mode of ignorance as a beast, as a bird, as a worm, as an aquatic, as a bug. This is going on. And in all cases the living entity thinks himself to be the master of his circumstances, yet he is under the influence of material nature of three modes.
How he is put into such different bodies is explained here. It is due to association with the different modes of material nature. One has to rise, therefore, above the three material modes and become situated in the transcendental position. That is called God consciousness. Unless one is situated in God consciousness, his material consciousness will oblige him to transfer from one body to another because he has material desires since time immemorial, before the material creation, when he was fallen to the clutches of tri-mode material existence from his original eternal position. But he has to change that conception. That change can be effected only by hearing and/or acquire holistic eternal knowledge from authoritative sources. The best example here is; Arjuna is hearing the science of God from Krishna. The living entity, if he submits to this hearing process, will lose his long-cherished desire to dominate material nature, and gradually and proportionately, as he reduces his long desire to dominate God's nature (as explained in Gita 7.27 as "ichha-dvesha" cause), he comes to enjoy spiritual happiness. In a Vedic mantra it is said that as he becomes learned in association with the Supreme Eternal Authority and he proportionately relishes his eternal blissful life, back to his original eternal realm.