Devotee (D): When the Upanishads say that all is Brahman, how can we agree with Shankara that this world is illusory?
Bhagawan Ramana Maharshi (B): Shankara also said that this world is Brahman or the Self. What he objected to is one's imagining that the Self is limited by the names and forms that constitute the world. He only said that the world has no reality apart from Brahman. Brahman or the Self is like a cinema screen and the world like the pictures on it. You can see the picture only so long as there is a screen. But when the observer himself becomes the screen only the Self remains.
Shankara has been criticized for his philosophy of Maya (illusion) without understanding his meaning. He made three statements: that Brahman is real, that the universe is unreal, and that Brahman is the Universe. He did not stop with the second. The third statement explains the first two; it signifies that when the Universe is perceived apart from Brahman, that perception is false and illusory. What it amounts to is that phenomena are real when experienced as the Self and illusory when seen apart from the Self.
The Self alone exists and is real. The world, the individual and God are, like the illusory appearance of silver in the mother-of-pearl, imaginary creations in the Self. They appear and disappear simultaneously. Actually, the Self alone is the world, the 'I' and God. All that exists is is only a manifestation of the Supreme.
D.: What is reality?
B.: Reality must always be real. It has no names or forms but is what underlies them. It underlies all limitations, being itself limitless. It is not bound in any way. It underlies unrealities, being itself Real. It is that which is. It is as it is. It transcends speech and is beyond description such as being or non-being.
He would not be entangled in apparent disagreements due merely to a different viewpoint or mode of expression.
D.: The Vedas contain conflicting accounts of cosmogony. Ether is said to be the first creation in one place, vital energy in another, water in another, something else in another; how can all this be reconciled? Does it not impair the credibility of the Vedas?
B.: Different seers saw different aspects of truth at different times, each emphasizing some viewpoint. Why do you worry about their conflicting statements? The essential aim of the Vedas is to teach us the nature of the imperishable Self and show us that we are That.
D.: About that part I am satisfied.
B.: Then treat all the rest as auxiliary arguments or as expositions for the ignorant who want to know the origin of things.
Major Chadwick was copying out the English translation of the Tamil Kaivalya Navaneetha, when he came across some of the technical terms in it which he had difficulty in understanding. He accordingly asked Bhagavan about them, and Bhagavan replied. "These portions deal with theories of creation. They are not essential because the real purpose of the scriptures is not to set forth such theories. They mention the theories casually, so that those readers who wish to, may take interest in them. The truth is that the world appears as a passing shadow in a flood of light. Light is necessary even to see the shadow. The shadow is not worth any special study, analysis or discussion. The purpose of the book is to deal with the Self and what is said about creation may be omitted for the present."
Later, Sri Bhagavan continued: "Vedanta says that the cosmos springs into view simultaneously with him who sees it and there is no detailed process of creation. It is similar to a dream where he who experiences the dream arises simultaneously with the dream he experiences. However, some people cling so fast to objective knowledge that they are not satisfied when told this. They want to know how sudden creation can be possible and argue that an effect must be preceded by a cause. In fact they desire an explanation of the world that they see about them. Therefore the scriptures try to satisfy their curiosity by such theories. This method of dealing with the subject is called the theory of gradual creation, but the true spiritual seeker can be satisfied with instantaneous creation."
Source: Teachings of Sri Ramana Maharshi in his own words by Arthur Osborne, Chapter Two - The world - Real or illusion?.