Simon has made a great mistake, and he receives a great shock. He thought he understood the situation; he thought his private reflections on what was happening were his alone, but the Lord shows that he knows exactly what Simon is thinking, even though Simon has said nothing out loud.
Christ always knows what we are thinking. He can see all our ideas. He knows exactly what we think of him, and he knows exactly how we look at his teaching and his gospel, and how we respond to it. The Lord Jesus Christ knows every thought that crosses our minds, and so he tells this parable to Simon, teaching him that the way to find the Lord is by grace, as we receive free forgiveness. It was grace that Simon had never grasped.
Grace is the free undeserved love of God the free undeserved favour of God. When God gives grace and favour, it is not to the people who merit it or think they do; it is to people who realize they deserve nothing at all, and the Lord Jesus Christ wants to teach Simon the Pharisee all about grace and this is how he does it.