The Lord is addressed here as air because the air is the most important representation of all the demigods, being all-pervasive. Arjuna also addresses Krishna as the great-grandfather because He is the father of Brahma, the first living creature in the universe.
You pervade all of this universe (sarvam samapnosi), since it is your product, like gold in earrings and bracelets. Thus you are everything.
If Lord Krishna were to ask why Arjuna was saluting Him and offering obeisance to Him repeatedly again and again from all directions it is because he earnestly wants the Supreme Lord to forgive the offence of not recognising His Supreme Absolute position as the Sovereign Lord of all creation. Arjuna previously was ignorant of Lord Krishna’s unparalleled divine glory as the progenitor and controller of all living entities in existence even Brahma and looked upon Lord Krishna simply as his best friend and comrade in arms. Now Arjuna is feeling remorse for any indiscretion he may have made rashly or wantonly which could have shown a lack of respect for the Supreme Lord. He is worried that due to feelings of affection and familiarity he may have by impropriety or through negligence offended the Supreme Lord in some way and he is beseeching Him to look at these things as minor misdemeanours and magnanimously forgive them.
Being of matchless greatness! You are the father of this world, of all that moves and does not move. You are the teacher of this world. Therefore You are the one most worthy of reverence in this world of mobile and immobile entities. There is none equal to You. How then could there be in the three worlds another greater than You? No other being is equal to You in point of any attribute like compassion etc. How could there be any one greater? Inasmuch as You are the father of all, the most worthy of reverence, teacher and exalted over all by virtue of attributes like compassion etc.
Krishna’s devotees relate to Krishna in various relationships; one might treat Krishna as a son, or one might treat Krishna as a husband, as a friend, or as a master. Krishna and Arjuna are related in friendship. As the father tolerates, or the husband or a master tolerates, so Krishna tolerates.
Though I am delighted, having seen your body composed of the form of the universe which has not been previously seen, my mind is distressed with fear because of its ferocity. Therefore, show me that form (tad eva rupa), the form of the son of Vasudeva, the form of sweetness, which is millions of times dearer to my life. Show favor to me—do not display to me that form of great power any longer. I have now seen you as the Lord of the devatas (devesa), the resting place of the universe (jagan nivasah). It should be understood that Arjuna did not see the body of Krishna in human form which was the origin of all the forms seen by Arjuna, when Krishna displayed the universal form, because his vision was covered by yoga maya.
Moreover, when you show your glory, show that glory filled with the highest rasa, which gives joy to the mind and eyes of people like us, which we saw before, in the form of the son of Vasudeva for performing human like pastimes, and not the majestic form which is distasteful to our mind and eye, revealed as the universal form, related to pastimes with the devatas, which was never seen before. With this intention Arjuna speaks.
I desire to see that same form with a crown of valuable jewels (tatha eva) which we saw previously sometimes, and which your parents saw when you were born. O form of the universe, now having thousands of hands, withdraw that form and appear (bhava) in that form with four hands.
“O Arjuna, you have said that you desired to see my majestic form (verse 3) and by your request, I have shown the form of the universe which is one of my parts. Why has your mind become disturbed on seeing it? Is it not astonishing that you plead with me, wanting now to see my human form?” Thus the Lord speaks this verse.
Being pleased with you, I have shown this form to you (tava) alone, and not to anyone else, since it has not been seen previously by anyone. In spite of that, do you not want to see that form?