Khapushpa is translated as sky-flower. It belongs to the genre of other similes such as gandharva nagara (sky city) and rajju sarpa (snake in the rope) etc. which are used for the purpose of illustrating the evanescent nature of the world. The simile is used to signify non-existence or a mere ‘construct’ in Advaita Vedanta.
However, there is a slight distinction between examples such as Khapushpa, sasaringa (horns of a hare), vandhyaputra (son of a woman who can’t conceive), which are semantic constructs, and those such as rajju sarpa, sukti rajata (nacre appearing as silver) etc which are cases of illusions superimposed upon empirically real objects, such as rope, nacre, etc.
We may mention a verse in the anthology employing this and other similes – the son of the woman who cannot conceive adorned with the sky flower and wielding the horns of a hare as the bow goes after bathing in the water of a mirage. The multiplicity of the world is real only so long as it is perceived. With the dawn of knowledge only a unitary consciousness remains. However, most Advaita schools admit that the world has vyavaharika (temporary, functional) reality, a quality that is inadmissible in the case of sky flower. Again, the world is temporary creation of Ishwara (God). In the case of an illusion, there is an indescribable creation of the illusory object, for the duration of the illusion (bhramasthale anirvacaniya padarthotpatti). Khapuspa, however, does not have even this temporary existence. It only means an impossible thing or a fanciful thinking bordering on hallucination on the part of the observer.