Bottom's transformation helps to further portray Shakespeare's central theme that human beings are fools.
The reason behind Puck's choice to transform Bottom's head into a donkey's head is to point out just exactly how much like a donkey Bottom is behaving. For no reason at all, Bottom thinks very highly of his acting skills. He thinks so highly of his skills that he even asks to be allowed to play every major role in the play, even though he has already been given the part of Pyramus, the lead male role. The reason he asks for so many roles is partially because he is overly excited about the play, and also partially because he does not think much of the other actors' skills. For example, when
Flute hesitates to play the female lead, Bottom insists that he can play both parts. Furthermore, when Snug hesitates to play the lion because he is afraid of the role, Bottom insists that he can play that role well, too, saying, "I will roar that I will do any man's heart good to hear me" (I.ii.65-66). Not only is it ridiculous for Bottom to think that he can play all three lead roles at once, the reality is that he actually plays his own role very poorly.
Puck witnesses Bottom bungle up his lines, despite his self-confidence, which is one reason Puck thinks Bottom is an idiot, or a proverbial ass. One example of a line Bottom bungles in their rehearsal is, "Thisbe, the flowers of odious savors sweet--" (III.i.75). Since odious means "repugnant," or "disgusting," we know that he actually meant to say the word "odors" instead, in reference to how the flowers smell (Collins English Dictionary). Since Bottom actually delivers his lines very poorly, we know that the reality is that he is a very unskilled actor, despite what his illusions are. Furthermore, since Bottom's illusions do not match his reality, we see just how foolish he really is.
Hence, we see that Puck changed Bottom into a donkey because Puck saw him as a foolish, ridiculous character, proving just how foolish mankind can be.
Transformation is sort of a main theme and a very big deal in this play, which makes sense because one of William Shakespeare's main sources in literature Ovid's Metamorphoses. In the third act of the play, one of the fairies, Puck, magically transforms Bottom's head into one of a donkey. When people associate this play with transformation, the first thing that comes to many reader's minds is Bottom's transformation, but in fact, the play covers many different examples of tranformation; this is just the most obvious one. Throughout the story, the characters go through both physical and emotional changes- they are transformed in personality and perspective towards one another. There are even simple transformations like the night turning into day, the dark turning into light, the moon waxing and waning in the sky, and also many more if thought of logically.
The literary significance of this transformation among many, is that the play's true theme and even its mood are built from and around transformation.