Bhashya
आप एव यस्य आयतनम् ।साधारणाः सर्वा आपआयतनम् ; वापीकूपतडागाद्याश्रयासु अप्सु विशेषावस्थानम् ;तस्य का देवतेति, वरुण इति- वरुणात् संघातकर्त्तुःअध्यात्मम् आप एव वाप्याद्यपां निष्पत्तिकारणम् ॥
In plain words
Waters are his home, in the widest sense — every water there is. But look closer and it narrows to this: water gathered somewhere, held in a pond, a well, a tank. What god does he answer to? Varuna, the one who binds water into shape. And turned inward, it's simply water itself that gives rise to water — the pond is made of nothing but more water.
Close to the Sanskrit
'The waters alone are his abode' — all waters in general are his abode; but a particular location in waters residing in receptacles such as ponds, wells, tanks and the like is meant here. Of him, what is the deity? — 'Varuṇa', he said; from Varuṇa, the agent of binding together — with reference to the self, water itself is the cause of the arising of waters such as those in ponds and the like.