I've read it more recently, and he did mean it literally. I've cut this together because it's far too long to quote en masse, but the full thing is at [1]
Desperate for something to feed my jones, I snaffled my other sister's
abandoned flute. And wow! I was a natural...immediately better with it than
with the guitar I'd been hacking at for months. [...] This was delightful but
mystifying. All I'd had to do was learn to play a scale, and this amazing river
of music poured forth with barely an effort on my part. It seemed almost as
though my hands and lips had always known what to do, had been waiting for me
to pick up the flute. [...] I got these stunning rushes of pure timeless joy,
when my consciousness seemed to expand outwards from the limits of my skin to
fill the universe and I could no longer tell whether I was playing the music or
the music was playing me. Nor were these effects just going on inside my own
head. [...] I was walking home, idly puzzling over this peculiar incident, and
damn near fell over when I finally got it. That girl had been trying to cope
with a theophany; she had looked at me and seen a god. A particular god. And I
knew, suddenly, with utter shattering certainty, which one it was. And that it
probably was not the first time I had inadvertently triggered such an
experience, and would almost certainly not be the last. [...] Not that I took
any of it seriously as a description of the real world. It was an intellectual
chew-toy, perhaps at best a way of understanding the pathologies that prevented
human beings from living the infinitely more desirable life of reason and
science. Until I realized, finally, belatedly, what had been happening to me.
Until the Great God Pan reached out of my hindbrain and thundered "YOU!". And
his gift is music and his chosen instruments the pipes and flutes. And his, too
the power of joy; magic so strong that when it flowed out of me, even before I
knew what I was doing, it amazed people into awe and incoherence and poetry.
[...] (And, oh, yes. The first time I handled a set of pan-pipes I could play
them. Fluently. Effortlessly. And knew I could before I touched them.)
[1]:
http://www.catb.org/esr/writings/dancing.html