These words are uttered by Rat to Mole when, in the chapter entitled "The Piper at the Gates of Dawn," the two animals go off to look for Portly, Otter's missing child. They eventually find Portly sleeping at the foot of a mythical creature with horns and hoofed feet. Mole asks Rat if he is afraid at this strange sight. Note Rat's response in full:

"Afraid?" murmured the Rat, his eyes shining with unutterable love. "Afraid! Of Him. O, never, never! And yet--and yet--O, Mole, I am afraid!"

If the mythical creature is understood to be a divine manifestation of a god-like figure, then this helps clarify Rat's response. On the one hand, the divine figure inspires within Rat "unutterable love," and yet on the other hand, the very fact that he is recognised to be divine means that the mythical figure is to be feared, no matter how kind and compassionate he is. Such a response is very similar to when the Beavers in The Lion, the Witch and the Wardrobe talk about Aslan, the lion representing God. They say that however kind Aslan is, creatures are rightfully a little afraid of him.