The recognition of God's kingship awakens a profound joy that sweeps across all of creation, uniting the higher spiritual realms with human beings. This shared happiness between the heavenly hosts and the inhabitants of the earth [מצודת דוד] stems from the unique nature of God's rule. When a human king is crowned, the event is often mixed with sadness and anxiety, as people worry that his judgment might be cruel and harsh. In stark contrast, the establishment of God's kingship brings immense joy to both heaven and earth [רש"י].
This universal happiness can also be understood metaphorically. The heavens and the earth rejoice because humanity has finally reached the ultimate purpose for which it was created. Until this moment of recognition, the natural world seemingly worried that all its ongoing efforts to sustain human life were empty and in vain. Now that humanity has achieved its true goal, the heavens and the earth can fully rejoice [רלב"ג].
The declaration that God reigns serves as a clear expression of His kingship being revealed in the world [מצודת דוד]. It points toward a time when all nations will universally recognize His authority [רלב"ג]. Within the immediate context of the historical event, this statement is voiced by the upright people of the generation. They announce that God's kingship is actively revealing itself, sparked by the joyous return of the Ark of the Covenant [רש"י].