This text answers the question posed by Arjun in the previous text, as to how Krishna could have educated someone millions of years older than he. Krishna says here that he has taken millions of births without forgetting his identity. Thus he could have instructed someone millions of years before his apparent birth.
This text points out a similarity and a difference between Krishna and Arjun, and, extrapolated, between the Supreme Lord and the individual living entity. The similarity is in the first sentence: bahuni me vyatitani janmani tava ca. Both the lord and the living entity take many different births. The second sentence notes the difference between the "birth" of the Supreme and the birth of the individual: tanyaham veda sarvani na tvam vettha. The Lord is always fully cognizant and all-knowing throughout all his appearances. The individual, however is forgetful, due to having his knowledge covered by lust upon contacting the material energy (see 3.37). This means that Krishna somehow never contacts the material energy when appearing in this world. Thus lust never arises to cover his knowledge. Krishna is therefore competent to start the disciplic succession through which pure knowledge migrates throughout the material world.
How can it be that material energy never covers Krishna, even when he appears in this world? The next text explains.
Veda-sarvani - all-knowing
This word indicates two things:
We can understand a deeper significance in these words by considering the purpose behind the question they answer (see 4.4, main point).