She is the goddess of courage and discernment.
It is said that one day Parvati went to bathe in the Mandakini River with her two attendants, Jaya and Vijaya. After bathing, the great goddess's mind went to some worldly related things. After some time, her two attendants asked her, "Give us some food. We are hungry." She replied, "I shall give you food but please wait." After a while, again they asked her. She replied, "Please wait, I am thinking about some matters." Waiting a while, they implored her, "You are the mother of the universe. A child asks everything from her mother. The mother gives her children not only food but also coverings for the body. So that is why we are praying to you for food. You are known for your mercy; please give us food." Hearing this, the consort of Shiva told them that she would give anything when they reached home. But again her two attendants begged her, "We are overpowered with hunger, O Mother of the Universe. Give us food so we may be satisfied, O Merciful One, Bestower of Boons and Fulfiller of Desires."
Hearing this statement, the merciful goddess quietly reminded herself "good help is so hard to find..." and so smiling gently, of course she severed her own head. As soon as she severed her head, it fell on the palm of her left hand. Three bloodstreams emerged from her throat; the left and right fell respectively into the mouths of her flanking attendants and the center one fell into her mouth.
After performing this, all were satisfied and later returned home. By this act, Parvati became known as Chhinnamasta.
There are two different interpretations of this aspect of Chhinnamasta's iconography. One understands it as a symbol of control of sexual desire, the other as a symbol of the goddess's embodiment of sexual energy.
The most common interpretation is one where she is believed to be defeating what Kamadeva and Rati represent, namely sexual desire and energy. In this school of thought she signifies self-control, believed to be the hallmark of a successful yogi. The decapitation of her own head also suggests that spiritual success and self-control are intrinsically connected with the losing of the head, which is symbolic of the ego. The three spurts of blood may also represent the three main subtle channels, the Ida, Pingala and Sushmana flowing free, and the three somewhat secret Chakras that exist outside of the body, above the head, as opposed to the other 6 which are connected to some point of the body.
The other, quite different interpretation states that the presence of the copulating couple is a symbol of the goddess being charged by their sexual energy and desire. Desire is one of the main reasons for manifestation of the physical universe, which is only though the power of the Maha Shakti/Maha Devi. Just as a deity seated upon a lotus is believed to acquire its qualities of auspiciousness and purity, Kamadeva and Rati impart to the Goddess standing over them the power and energy generated by their lovemaking. Gushing up through her body, this energy spouts out of her headless torso to feed her devotees and also replenish herself. Significantly here the mating couple is not opposed to the goddess, but an integral part of the rhythmic flow of energy making up the Chhinnamasta icon. The mother who is the physical universe also creates, maintains and destroys it as the Shakti or power of the Trimurthi and the power behind everything which plays a role in the universe. The Mother's creation ends up becoming her food as well, which is also very much related to blood sacrifice which plays a role in some Shakti/Mother Goddess worship, because it's the giving of life energy back to her so that the energy is recycled and able to be used for other creative purposes.
The image of Chhinnamasta is a composite one, conveying reality as an amalgamation of sex, death, creation, destruction and regeneration. It is stunning representation of the fact that life, sex, and death are an intrinsic part of the grand unified scheme that makes up the manifested universe. The stark contrasts in this iconographic scenario-the gruesome decapitation, the copulating couple, the drinking of fresh blood, all arranged in a delicate, harmonious pattern - jolt the viewer into an awareness of the truths that life feeds on death, is nourished by death, and necessitates death and that the ultimate destiny of sex is to perpetuate more life, which in turn will decay and die in order to feed more life. As arranged in most renditions of the icon, the lotus and the pairing couple appear to channel a powerful life force into the goddess. The couple enjoying sex convey an insistent, vital urge to the goddess; they seem to pump her with energy. And at the top, like an overflowing fountain, her blood spurts from her severed neck, the life force leaving her, but streaming into the mouths of her devotees (and into her own mouth as well) to nourish and sustain them. The cycle is starkly portrayed: life (the couple making love), death (the decapitated goddess), and nourishment (the flanking yoginis drinking her blood).
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