Lord Shiva is known as Nataraja as he is the Lord of Dance as an eternal dancer. His dance with music is described since the Puranic period. Tandava (denote the powerful) and masculine dance as Kala-Mahakala (denote the destruction of the whole world) are the two most common types of the dance associated with Shiva . One of the most famous dance the Tandava-Lasya is associated with destruction and creation of the world. When Lord shiva dances, he represents truth, and by dancing he banishes ignorance and helps relieve the suffering of his followers.
Shiva is believed to assume two states – the samadhi (superconscious) state, and the tandav or lasya (dance) state. The samadhi state is his nirgun (non-materialised) state, while the tandav or lasya state is his sagun (materialised) state.
Body movements performed to depict a particular event are known as natan or natya. The one who performs this natan is a nat (actor). Traditionally, it is believed that Nataraj is the promoter of dance. Since Shiva is the pioneer amongst actors/ dancers, the title of Nataraj is accorded to Him.
The Universe is Shiva's dance school, its is his playing field. He is not only its dancer, he is its observer too. In fact, Nataraj plays the role of creating a buzz in the universe through the commencement of his dance and merging the visible and invisible Creation into Himself when he stops dancing.
Thereafter, Nataraj remains alone, engrossed in ananda. In short, Nataraj is the manifest form of all godly activity. Nataraj’s dance represents the five actions of God - namely creation, sustenance, dissolution, the covering of the great illusion and initiation - God’s grace to get liberated from the Great Illusion.
When Shiva dances, all heavenly bodies respond. Saraswati Devi is said to be playing the veena (the stringed musical instrument), Indra is said to be playing the flute, Brahma is said to keep rhythm, Lakshmidevi is said to be singing, Shri Vishnu is said to be playing the mrudanga (a type of drum) and all other deities stand around watching the dance!