Here it’s useful to know some background about this simile, because most people who are into Zen also mistakenly think it’s a Zen thing. It’s not really a Zen thing, although it was picked up by Zen. It’s actually a simile from Indian Mahāyāna Buddhism that appeared in the Laṅkāvatāra Sūtra, and it is not about sectarianism.
The Laṅkāvatāra uses many illustrations about the moon, which generally symbolizes the Tathāgatagarbha, or true empty nature of the mind. The following excerpts are from Suzuki’s old translation.
The first appearance is in a long series of questions asked in verse, in which we see:
Why is the world like a vision and a dream? How does it resemble the city of the Gandharvas? Why it is to be regarded as like a mirage, or like the moon reflected in water? Pray tell me.
Later in the sūtra, we see the metaphor of the finger pointing to the moon:
The [Tathagatagarbha] is indeed united with the seven Vijnanas; when this is adhered to, there arises duality, but when rightly understood, duality ceases. The mind, which is the product of intellection since beginningless time, is seen like a mere image; when things are viewed as they are in themselves, there is neither objectivity nor its appearance. As the ignorant grasp the finger-tip and not the moon, so those who cling to the letter, know not my truth. The Citta dances like a dancer; the Manas resembles a jester; the [Mano-] vijnana together with the five [Vijnanas] creates an objective world which is like a stage.
The following passage uses the moon metaphor in terms of “shining” awareness.
After being at the stage of Dharma-Cloud, he reaches as far as the stage of Tathagatahood where the flowers of the Samadhis, powers, self-control, and psychic faculties are in bloom. After reaching here, in order to bring all beings to maturity, he shines like the moon in water, with varieties of rays of transformation. Perfectly fulfilling the [ten] inexhaustible vows, he preaches the Dharma to all beings according to their various understandings. As the Bodhisattva-Mahasattvas, Mahamati, have entered into suchness, they attain the body which is free from the will and thought-constructions.
Throughout the sūtra there are many illustrations given about the moon and the water. Generally we can say:
- The water is the sea of suffering.
- The reflections seen in the water are illusory reality.
- The finger pointing at the moon is the scriptures.
- The moon itself is the Tathāgatagarbha.
- The rays of the moon are correct awareness / observation.
Unlike so many Zen people of today, the early Chan Buddhists were mostly fully-ordained monastics who endeavored in their study of the sūtras. They often used illustrations from these texts and did so with the expectation that others would automatically understand the references without any explanation needed. Many of the fundamental ideas in Zen were just taken from Mahāyāna sūtras.
There are many other variations on these sort of moon-and-water illustrations. For example, the popular image of Avalokitasvara Bodhisattva seated on a rock, overlooking the water, is also about observing the mind, and here the water is also the sea of suffering. Avalokitasvara is the Mahāyāna bodhisattva of meditative observation.
As for the Laṅkāvatāra itself, there are myths about Bodhidharma handing down the Laṅkāvatāra of four fascicles to the second patriarch Huike, but those are basically just myths. In fact, Bodhidharma was sometimes mistaken for or conflated with the translator of the Laṅkāvatāra of four fascicles (T 670), the 5th century Indian monk Guṇabhadra.
Especially notable for this forum, Guṇabhadra not only translated Mahāyāna Tathāgatagarbha and Yogācāra texts such as the Laṅkāvatāra, but also translated our entire Saṃyukta Āgama (T 99), which is now one of the most important extant EBT’s, period. Guṇabhadra knew the Saṃyukta Āgama and translated the entire collection, but he still advocated Mahāyāna and was known as a 摩訶衍法師 or “Mahāyāna Dharma Preacher,” the class of teachers who developed and propagated the Mahāyāna sūtras.