It has to be read as poetic language. It's evocative, unsettling, and striking, rather than explicit.
Fighting monsters making a hero monstrous is not an uncommon trope, for instance it can be found in Beowulf where the hero progressively takes more of the characteristics and language previously reserved for monsters - with allegorical insights stored eg against hording treasure (& power).
The twist of the abyss gazing back into us is uniquely Nietzschean. I think purposefully not definite in meaning, and that in major part is why it is the single best known phrase from Nietzsche's work, and has totally entered the language as a stock-phrase.
In 'Thus Spake Zarathustra' published in parts between 3 & 5 years earlier, he had said:
"Man is a rope stretched between the animal and the Superman--a rope over an abyss.
A dangerous crossing, a dangerous wayfaring, a dangerous looking-back, a dangerous trembling and halting.
What is great in man is that he is a bridge and not a goal: what is lovable in man is that he is an OVER-GOING and a DOWN-GOING.
I love those that know not how to live except as down-goers, for they are the over-goers.
You could draw from this ideas like crossing a tightrope it is not helpful to look down. Or dwelling to deeply on what seems uncrossable, makes it more of an obstacle. But Nietzsche is also clearly exhilarated by the danger, the great challenge is necessary for the new more 'angelic' being. The depth of the abyss, the size of the challenge, defines the scope for greatness, which Nietzsche values above all else. A thirst for danger, towards down-going, is necessary for over-going, to prefer death in the attempt than never to try.
But I would point to poetry to how widely used phrases or metaphors lose power. Nietzsche frequently risked that, like in Zarathustra where the constant level of epic drama is not easily kept. In poetry the 'blazon' form, compares a usually unattainable courtly love's body parts to a series of rapturous objects. It led to the 'contreblazon', like one of Shakespeare's most famous sonnets 'My mistress' eyes are nothing like the sun'. The twist on form, makes some of those better remembered than the whole genre of blazons.
The abyss also gazes back twists the previous metaphor, it is not just seeing emptiness and becoming more empty, it also personifies the emptiness. I would identify that with what Nietzsche saw as being all of our greatest opponent, nihilism (which Nietzsche consistently sought to oppose, and is a philosopher of nihilism, never one advocating it), manifested in 'L'Appel du Vide', the 'call of the void', the irrational urge to do dangerous things like jump off high places even though otherwise happy. Without values we risk losing our grip on meaning, on social cohesion. But, by truly acknowledging this great enemy, and it's power, by refusing to believe tinkering with the old system will work, only then is real transcendence possible, creating new systems of values, ascending the tightrope - fighting monsters without become monsters, or nihilistic, but instead, angels, creating new values.
He transcends his own earlier metaphor.