In the previous text, Krishna said one should receive wisdom from the wise. This verse explains the result of obtaining such wisdom: freedom from the bewilderment that arises from material identification.
Moham evam – This illusion
Krishna speaks directly to Arjun, who was bewildered by his duty conflicting with his affection for his relatives. Arjun will no longer be consumed by this bewilderment when he obtains knowledge, for by knowledge he will see:
Bhutani asheshani – All living entities
Atmani – In the spirit.
By knowledge, Arjun would be able to see the eternal spiritual nature of all the people his duty demanded he kill. Furthermore, he would see that all living entities are:
Mayi – In me (Krishna)
He would be able to see that, beyond the material relationships of bodies, all living entities are eternally related to Krishna, God. This would help Arjun cope with the grief arising from that fact that his duty demanded he war against his own relatives.