Since the word tathāgata is a compound of two parts, different interpretations arise according to where exactly one inserts the scalpel. For example, if one takes tathāgata to be composed of Tat and āgata one may conclude the following: tat (literally, 'that') has down the centuries in India always referred to the Absolute or the Unconditioned, what in the Hindhu tradition is named Brahman), as in the noted Upanishadic dictum: “That thou art” (Tat tvam asi) from the Chandogya Upanishad, a widely discussed spiritual document in the time of the Buddha. That would here refer to: that into which the muni or sage has merged as a consequence of final liberation.
This interpretation, however, is not in accord with Sanskrit grammar, which clearly offers two possibilities for breaking up the compound: either Tathā and āgata or Tathā and gata. Tathā means 'thus' in Sanskrit and Pali, and Buddhist thought takes this to refer to what is called 'reality as-it-is' (Yathā-bhūta). This reality is also referred to as 'thusness' or 'suchness' (tathatā) indicating simply that it (reality) is what it is. A Buddha or Arhat is defined as someone who 'knows and sees reality as-it-is' (yathā bhūta ñāna dassana).
Gata is the past passive participle of the verbal root gam (going, traveling). Āgata adds the verbal prefix Ā which gives the meaning “come, arrival, gone-unto”. Thus in this interpretation Tathāgata means literally either “The one who has gone to suchness” or "The one who has arrived at suchness."
In the Dhammapada, the actions of an arahant are described as without trace (ananuvejja) or 'trackless' (apada) 'like the birds in the sky' (ākāse'va sakuntānam gati tesam durannayā). Similarly in the Mahabharata there is a verse which says, "Just as the footprint of birds flying in the sky and of fish swimming in the water may not be seen, so is the going of those who have realised the truth| (tathā jñānavidam gatih) Śāntiparva 181. 12. Tathāgata evokes this indefinable, ineffable quality of one who has arrived at the truth.
The term Tathagata serves to say the unsayable. As the Buddhist writer Alan Watts once put it, "I'm in the business of effing the ineffable."