Shiva is called as Kapali because he turns unworthy to most worthy and accommodates him. One who holds a vessel made out of skull in his lotus-like hands, that delightful Lord is none other than Kapali. A materialist keeps the best pot just to show off his good quality but Shiva does not need to show his identity. He is qualified in spite of his disqualification while worldly class of people are worthless even if they are very competent. Lord Bholenath stays on alms by owning this skull and thus he gives a lesson to the common people about the upshot of offences. He chopped off the fifth head of Brahma due to his atrocious act. Though he is all powerful, still he atoned for this offence at Kapal Mochan Teerth in the form of Bhairav.

Once Brahma ji got pride that he alone is the supreme Lord of the universe and none other is equal to him. Just to vanquish his pride, Lord Kapali chopped off his fifth head and made it his munching pot. He became the most powerful even at being a Kapali. The hidden secret of Kapali is to destroy the evils like ignorance etc. which are contrary to celestial beings. According to Bhaskar Ray—

कमलभवकरोटिव्रातमालाधरत्त्वात् तदधिकबलशाली भासि कंकालनाथः।
परशिव करवीरक्षेत्रमध्यस्थलिंगे निवससि सुरवंद्यो नामतस्त्वं कपाली॥

।O Paramshiv! In spite of holding a skull, you appear more powerful than Brahma as you wear a garland of skulls made out of heads of Brahma. You are established in the form of Kapalishwar lingam at Karveer province and you are worshipped by demigods, so you are Kapali just for name sake. The skull of the Lord is full of mellow of liberation in spite of having five holes. Jagaddhar Bhatt has described it in his Kusumanjali—

भालाग्निकीलकलिताखिलरन्ध्रभागं
भर्गस्य वो दिशतु शर्म शिरः कपालम्।
यत्कालवह्निवपुषः पचतः प्रभूत
भूतव्रजं व्रजति तस्य महानसत्त्वम्॥

One who is scorching all the planets by his devastating fire and thus becoming like the kitchen of Rudra, and whose five holes get filled by the fire-flames of Shiva’s head, may that skull of Shiva bestow the wealth of liberation upon you.

Actually this universe itself is skull and Shiva has united it by standing in the middle of both and he personally became the master of it. According to Upanaishads the food-grains and its consumer are Kapal and Shiva is called Kapali for being the proprietor of both.

When Lord Bharga saw that Brahma is lustfully attracted towards his daughter, then he chopped off his head and used that as a pot for begging alms. Therefore he is known as Kapali. It is mentioned in Shiv Mahiman Stotram. The skull in the hands of Lord is full of nectar, so it is Kapal just for name sake, actually it is a nectarine pot.

Shiva is Kapali as he wears the garland of skulls of every birth of divine mother Sati. Shiva is said to be Kapali as he enters in this body in the form of spirit soul through a hole within the head.

According to Ekakshari Kosha the literary meaning of word ‘ka’ is Brahma (The Creator) and ‘Pali’ means maintainer. Lord is the maintainer even of the creator, so he is called Kapali. ‘ka’ is also meant for Vayu (Air element). Shankar is called Kapali because he is nourishing us in the form of vital force (Pran-Vayu) in the body. Another meaning of ‘ka’ is Yamraja (The God of death). Shiva is called Kapali as he is controlling Yamraja. In the Medini Kosha, we find an another meaning of ‘ka’ and that is fire. Shiva maintains us by assuming the form of digesting fire in our body and thus he called Kapali. If water is supposed to be the meaning of ‘ka’ then Kapali sustains our life in the form of water.

Another meaning of ‘ka’ is Atma (the spirit soul). Shiva sustains all in the form of spirit soul of all beings, so he is called as Kapali. ‘ka’ is also used for Sun-God. Shankar is called Kapali because he gives life to the world by personally manifesting as Sun deity.

As per Anekarthaka Kosha another meaning can be derived from the word ‘ka’ and that meaning is happiness. Lord Pashupati is called as Kapali as he is residing in all beings in the form of bliss.

As per Vishwa Kosha Daksha (expertise) is also a meaning of ‘ka’. Lord Kamripu is called as Kapali as he gave life to Daksha Prajapati, when he was killed during the fire-sacrifice.

‘ka’ means Brahma and ‘Pa’ means Vishnu. Shiva is named as Kapali because he bestows the powers of creation and maintenance upon both of these Gods.

To experience the omnipotence of the Lord is the true form of worship of Kapali.