Oh man! I knew this story. It was on my 11th grade Philosophy book and I believe it came up in the exam. I had totally forgotten about it. As school manuals carry dispersed texts and we tend to forget them as time passes (and a shitload of time did pass), sometimes, there are things we know and read before that we can't quite place. This is one of those cases. Although I didn't read the full book, I had read this, and probably a couple more exerpts, before.
In my opinion, the expression can not be taken out of context in this story, thus, as a statement, you can not isolate it from the story.
Zarathustra does carry the interpretation of an unintersted, disconnected or we can assume "dead" God, that got things in motion and left us with the responsability to reach for a God like status ourselves, in a way that can be interpreted to mean that we are a in sort of a cocoon state between a caterpillar and a butterfly. As a freemason, I understand Nietsche's work as a paralel to the theorization of the reasons for the non-operative masonic work of polishing the rough stone that we are into a more perfect state. That is undertood as the both the objective and the responsability of each individual mason. Under that definition, I interpret Nietsche's metaphors as a call for greater responsability in the use of our own free will and a call to better ourselves. Of course, I may be totally wrong, and those who have given it the tortuous biological significance that has cost us millions of lives and a world war might have been right, but I don't think so. I stick with my interpretation.

Edit ( A few minutes later): Nietsche was a fellow freemason, so... He may have been in accord with my view of his texts.