avyaktam--unmanifest, transcendental to matter, that which lacks body and Karmic effects; vyaktim--Manifest or refers to human beings or living beings with body; apannam--has become; manyante--think; mam--of Me; abuddhayah--Unintelligent persons; param--supreme; bhavam--state of being; ajanantah--without knowing; mama--My; avyayam--imperishable; anuttamam--Unsurpassable.
The word vyaktim=created living being and not just visible manifestation. Unintelligent people think of me, the unmanifest(transcendental to all matter), as having become created living being, without knowing My imperishable and unsurpassable state of being. Shri Krushna already is visible to human beings. Hence the abuddhayah=Unintelligent persons who sees this visible form think that the visible Shri Krushna has become human being, with a material body without knowing that HIS form or RUPA is imperishable and unsurpassable. This is what the verse says.
