In this majestic song the worshippers were led to consider the very King of Kings and Lord of lords. Both leader and people probably sang very slowly and emphatically, because they were singing of the awesome majesty of the Lord God.
It begins with the foolishness of the "nations" (Gentile unbelievers), who try all their lives to ignore God and His sovereignty over all people and nations. Of course their attempt is rebellion against their rightful King, against Him Who made them and owns them. And of course that rebellion is not only against the King of kings, but also against His anointed earthly king in Jerusalem. But they need to know that they are imagining a "vain thing," that such rebellion is a useless, doomed venture.
The psalmist envisions the Lord of all the earth sitting upon His holy throne - and laughing! He's likened to a man making fun of inept bumblers who haven't the foggiest notion of what they're really doing. They just don't realize what it means to rebel against the sovereign, holy Majesty of the universe. They think they're merely conducting war against another earthly king like themselves, a king against whom their superior manpower and armament will surely be victorious in any battle.
But it's as though suddenly, in the midst of the earthly battle there came a great voice, a voice so powerful as to drown out all the sounds of battle, a voice that was instantly heard, a voice on account of which the battle came to a sudden and complete halt. Suddenly every warrior drops his sword in fear and falls prostrate upon the ground. The Voice says, "Yet I have set My King upon My holy hill of Zion!" Every terrified heart suddenly realizes that it isn't man against whom they've been fighting, but against the holy God Himself!
Then another voice is heard. It's the triumphant voice of God's earthly king on Mt. Zion. He says, "I will declare the decree (the command of the divine King): the Lord has said to Me, 'You are My Son, today I have begotten You. Ask of Me, and I will give You the nations for Your inheritance, and the ends of the earth for Your possession. You shall break them with a rod of iron; You shall dash them to pieces like a potter’s vessel!'"
God's earthly representative has spoken. All other earthly kings had best pay careful attention! In fact, this earthly representative of God goes on with heavenly confidence to say, "Now therefore, be wise, O kings, be instructed you judges of the earth: serve the Lord with fear, and rejoice with trembling. Kiss the Son (submit completely to the earthly king), lest He be angry, and you perish in the way, when His wrath is kindled but a little!" The advice is awesome, and the necessity of obeying it is absolute.
It's the same for us. In a much larger sphere, the heavenly King - the Son of God - speaks to all mankind. He "declares the decree" to all peoples of all time. They are all in rebellion against their rightful King. But in fear they must cease their rebellion, lay down their arms, and fall before this awful Voice of GOD. Even now His servants are calling men everywhere to repent.
These servants of Jehovah should declare their message with absolute confidence, because their King reigns upon His holy Throne in heavenly Zion, and all the noise and tumult of earthly rebellion doesn't change that fact.
"Blessed are all those who put their trust in Him!"