This section of the book satirizes the trait of humans to assume superiority over other races or animals. Gulliver is intentionally marooned on the shores of Houyhnhnmland by the ship's captain. While trying to figure out what to do, Gulliver is protected from a mob of attacking Yahoos by a pair of horses, who are intelligent and reasoning, calling themselves Houyhnhnms.
But this animal seemed to receive my civilities with disdain, shook his head, and bent his brows, softly raising up his right fore-foot to remove my hand. Then he neighed three or four times, but in so different a cadence, that I almost began to think he was speaking to himself, in some language of his own.
I was amazed to see such actions and behaviour in brute beasts; and concluded with myself, that if the inhabitants of this country were endued with a proportionable degree of reason, they must needs be the wisest people upon earth.
(Swift, Gulliver's Travels, eNotes eText)
Gulliver's reaction is that the horses, which in his land are non-intelligent beasts of burden, show such intelligence here that their masters -- which he assumes to be human -- must be incredibly smart. His reaction is human-centric, for despite his travels he has little reason to think that any creature beyond Man is intelligent. As he soon finds, the Houyhnhnms are the intelligent ruling race in this land, and the human-like creatures, the Yahoos, are barely more than animals themselves. Gulliver learns their language and comes to believe all human-like creatures to be Yahoos; he causes himself distress when he sees himself in a reflection.
The idea of an intelligent non-human creature doesn't occur to Gulliver because his society has imprinted human superiority in his mind. By forcing Gulliver to accept non-human creatures as intelligent, Swift changes the dynamic of human/animal and leaves Gulliver with a moral dichotomy in his own life. Is it moral to continue subjugating animals when he knows that they can think for themselves? Gulliver instead takes pains to remove himself from society, becoming a hermit with an affinity for horses.