The words bhutaih pancabhih in this verse refer to the five gross material elements -- earth, water, fire, air and sky -- which form the basic building blocks of the material world. When the conditioned living entity enters within these five elements, consciousness becomes manifest, along with the functions of the mind and intelligence. Unfortunately, the consciousness manifest under the modes of material nature is governed by ahankara, or false ego, in which the living entity wrongly considers himself the enjoyer of the material elements. Although the Supreme Personality of Godhead, Purushottama, enjoys His pure transcendental existence in the spiritual sky, the material elements are also meant for His enjoyment, through the process of yajna, or sacrifice. This material world is called Devi-dhama, or the abode of the illusory energy of the Lord, Maya-devi. The Brahma-samhita explains that the Supreme Person is not at all attracted to His inferior energy, maya, but when the material creation is used in the devotional service of the Lord, the Lord becomes attracted by the devotion and sacrifice of the living entities, and thus, indirectly, He is also the enjoyer of the material world.

We should not think that the pastimes of Lord Narayana as the Supersoul and creator of this universe are on a lower spiritual level than Narayana's eternal pastimes in the spiritual world. Were Lord Narayana in any way to diminish His transcendental bliss and knowledge in His activities of material creation, He would have to be considered a conditioned soul, affected by contact with the illusory potency. But since Lord Narayana is eternally aloof from the influence of maya, His activities as the Supersoul of this universe are exactly on the same transcendental level as His activities in the spiritual world. All the activities of the Supreme Personality of Godhead are part and parcel of His unlimited spiritual pastimes.