Nastya, do you understand the idea of a "muse" as person who gives a poet or writer inspiration? In Greek myth, the muses were wise goddesses, who inspired the poet to create great works. Think of (or if you don't know them already, look them up....) the opening lines of the Iliad, or the Odyssey, or the Aeneid, in which the Muse is asked to inspire the poet to tell the story. Atwood is turning that idea upside down: her idea is that "stupid women" are really the source of literature, and so the real Muse is not a wise goddess, but is instead a "fluffball": that is, an airhead; a featherbrain; an intellectual lightweight -- in other words, someone stupid.
It's from a little poem in prose (It can be found if clicking the link up here).
I think the phrase is a metaphor.
Here is context:
Just before the phrase the Author describes the hard fate of stupid women: they flee from their incest-minded stepfathers; make inappropriate marital choices and has to dodge different calamities, that has fallen upon them.
Don't feel sorry for her, as she stands their helplessly wringing her hands:
fear is her armor.
Let's face it, she's our inspiration! The Muse as fluffball!
And the inspiration of men, as well!