Why should they bow?
Malbim: You who intend to bring a gift to His Chatzeros (refer to 94:8:1:2), know that from there you will reach the palace. Really, He does not dwell separated from the nation. He is prepared to appear in front of those who visit His Chatzeros with a gift. When you see Him, bow with fear. Via appearing in His beauty, He is elevated above natural laws and does wonders like His desire. This is called Kodesh - elevation over nature. When He appears in front of His creations via Hashgachah Pratis, this is Hadras Melech; He does not need officers to help Him conduct.
What is "b'Hadras Kodesh"?
Radak: It is in the Beis ha'Mikdash, which is more Mehudar (beautiful) and Kadosh than all houses.
Malbim: Refer to 96:9:1:1.
Why does it say "Chilu Mipanav"?
Radak: You did not fear Him until now. When you see His wonders, fear Him!
'Rashi' (Divrei ha'Yamim I, 16:30): When a king sees that people fear him, he instills more fear on them, and they worry more lest he destroy all their houses. Hashem does not do so. When the world fears Him, then it is established and it will not falter. He takes vengeance, and the straight endure, and the land endures and does not falter. Therefore, the entire land should fear Him and not worry; He will only come to fix the land to settle it. When people do not fear Him and sin, he overturns them and destroys them!
Malbim: Realize that He lowers Himself to see in Shamayim and Aretz. He can destroy nature and conduct via Hashgachah. (Therefore, fear Him!)
