In many ways this passage gets to the very heart of the Sefer Yetzirah. The title "Sefer Yetzirah" means "Book of Formation", and it refers to "yesh m'yesh", creation of something from something, as opposed to "yesh m'ayin", something from nothing. In general, we think of God as having the capacity to create something from nothing while man creates something from something else. The Sefer Yetzirah describes this process of creating something from something else in terms of permutations, i.e. rearrangements of what already exists. For example, a messy house can contain the very same objects as a clean house. Only the arrangement is different. Try drastically rearranging the furniture in a room in your house, and see how it changes the energy. The Chinese have a saying that if you want to change your life, just move twenty-seven things in your house. This proverb is very much in line with the teachings of the Sefer Yetzirah. By rearranging our lives, we can change a negative situation into a positive one.
The Hebrew aleph-bet contains twenty-two letters. A permutation of the letters of a word can be described in terms of replacing one letter with another. For example, to change "delight" (oneg, Ayin-Nun-Gimmel) to "plague" (nega, Nun-Gimmel-Ayin) we simply replace Ayin with Nun, Nun with Gimmel, and Gimmel with Ayin. We can represent all possible ways of replacing one letter with another by first arranging the twenty-two letters in a circle. We then draw lines from each letter to every other letter to represent all possible replacements that may be made for that letter. This creates a diagram with 231 lines. Each line represents a gateway to another version of reality that can be formed by creating a different arrangement of the fundamental elements from which our world of perception is derived. Try "permuting" some of the elements of your life, and see what happens.