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Krishna describes the ignorance of those who don't understand His nature. 'Avyaktaṁ vyaktim āpannaṁ manyante mām abuddhayaḥ'—the ignorant think that I, the unmanifest, have come into manifestation. 'Paraṁ bhāvam ajānanto mamāvyayam anuttamam'—not knowing My supreme, imperishable, and transcendental nature. This verse shows that ignorant people think Krishna is just a manifestation—they don't understand that He is the unmanifest Supreme, always existing, never changing. They see only His manifestation and miss His true nature. This connects to verse 7.23's teaching about different understandings and prepares for verse 7.25 where Krishna will describe how He remains unmanifest to most.
See how this wisdom applies to different life situations