As the mirror is present inside and outside the object it reflects, so too the Supreme Lord exists inside and outside this body.
To illustrate the all-pervading nature of the Self, Maharshi brings the plane mirror, which reflects objects in front in all their detail.
We look at our face using the mirror, but do not think of the reflectional process. Everything reflected is surrounded and filled by the mirror. The mirror is inside and outside the reflected objects. One step further, the mirror alone is, no objects at all, as we seem to think.
Consciousness animating the body, is the sole inner presence. Mind, intelligence and ego are functional names. Entire world is no more than a reflection in inner Consciousness. Its reflectional state is called the mind. Inside and outside the reflected objects, the inner presence alone is. It surrounds and penetrates all.
Go a step further. Consciousness, the inner sentience, alone is. All objects are mere reflections it causes in itself. Everything is but its display, as are the objects in the mirror. Does mirror have any inside? Can physical external objects be ever there? The same is the fact about objects too. All are inner reflections alone.
Nothing but the sentient Self has independent existence. The whole display belongs to the Self, the supreme Lord.
The point to be grasped is that the mirror alone is, not the reflections in it. So too, the Self alone is, not the pañca-bhūtas or the world constituted by them.