What does it mean to mistake a street lamp for moonlight?

This statement means that the street lamp is regarded as the moon.

Because the light from the street lamp is a circle-like area when emitted, and the moon is a round area. Sometimes due to blocked vision, dim light, etc., people will mistakenly think that the street lamp is the moon in the night sky.

This sentence means that the street lamp is regarded as the moon, which is a metaphor for people's misunderstanding or wrong judgment of things, and also implies the misunderstanding or blind pursuit of the truth.