Ramanuja's Commentary
Observing Arjuna overwhelmed with grief at not properly perceiving the actual distinction between the physical body and the soul and yet discoursing in the way that one with proper knowledge of the soul existing independent of the body would expound; seeing him in the predicament of having conflicting views, beholding him languishing with inactivity when both the opposing armies were ready for battle; Lord Krishna smilingly began to instruct him in the very next verse beginning na tv evaham jatu nasam meaning never was there a time I did not exist, all the way through to Chapter 18, verse 66 ending aham tvam sarva-papebhyo moksayisyama ma sucah meaning I shall deliver you from all sinful reactions do not fear. Encapsulated within the threefold doctrines of Karma Yoga, Bhakti Yoga and Jnana Yoga which are the sole means for realising and then acquiring knowledge of the true nature of the individual consciousness and the science of attaining communion with the Ultimate Consciousness.
It should be noted although Arjuna was lamenting the word prahasan means smiling. This indicates that Lord Krishna discoursed on these most esoteric subject matters regarding the nature of the soul and the difference between the material and spiritual manifestations while in the mood of enjoying a pleasurable recreation.