What are the different states of the atman in the Upanishads?

[A question from an online discussion group brought to Swami by Śrī Anil.]

Swami replied: Ātman means soul or a person in general. It refers to the human being that is made of inert energy along with matter and awareness. Matter and awareness are different forms of inert energy alone. Hence, ātman basically means the all pervading inert energy that has materialized into matter and which also gets converted into a special form called awareness. Ātman is creation and not the Creator. Of course, when the Creator (unimaginable God) merges with an energetic being or a human being, that particular Ātman is also God or the Creator. But you cannot call every soul God. Monarchy is bad and democracy is good in politics or worldly life (pravṛtti), but not in spiritual knowledge. Every soul is not God, but it is also equally wrong to say that no soul is God. One or very few souls become God by the will of God alone and not by the will and effort of any soul.