This representation of Shiva is known as the lingam. The word lingam literally means a "sign" or distinguishing mark. Thus says the Linga Purana: "The distinctive sign by which one can recognize the nature of something is called lingam."
There are variations on the birth of this symbol of Lord Shiva, some of which ascribe an esoteric and abstract origin to it. For example when Shiva is visualized as the intangible primordial Creative Power, the lingam is said to be his sign (symbol) which can be worshipped by his followers, who require a concrete entity to focus their prayers on.
This stream of thought however does not negate the phallic connotations of the lingam. Its literal meaning as a distinguishing mark links these two interpretations. The phallus is the lingam, the symbol of Shiva's manhood, and of which the human organ is just a microcosmic reflection.
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