Oracle: That's what you felt [the Source] when you touched those Sentinels. But you weren't ready for it. You should be dead, but apparently you weren't ready for that, either. (M3)
How did Neo touch the sentinels? See the "Neo's Powers" section (or more specifically, Neo's Powers: Stop Sentinels).
When Neo chose the left door, the system immediately saw Neo as being "without purpose" from then on, and therefore an entity that should be destroyed or deleted. When Neo destroyed the Sentinels, he did so by connecting to the Source. The Source identified Neo immediately as an entity that needed to be deleted. But Neo is not at a point where he would choose deletion. Neo denied deletion, probably subconsciously in an instant. What does the system do with all programs that deny deletion? The program is placed in Mobil Avenue for an opportunity to hide in the Matrix (although at the whim of the Merovingian). Neo was there as an exile!
So, when the Oracle says, "But you weren't ready for it", she is talking about the fact that Neo wasn't ready to destroy sentinels yet without endangering himself because Neo hasn't fulfilled his purpose - the system will therefore take measures to prevent Neo from using his real world powers. "You should be dead" means that the system tried to delete Neo, and "...but apparently you weren't ready for that, either" means that Neo will not yet accept his own deletion.
When Neo woke up in Mobil Avenue, did you notice he had on different clothes? Neo was also missing his groovy sunglasses. While the Matrix is built on choice and allows for individual RSI to take over, Mobil Avenue lies outside of the Matrix, so it is not built with choice as a fundamental law. Why is choice not a fundmental law of Mobil Avenue? Simple: The Merovingian (who completely controls Mobil Avenue) does not believe in choice. He believes in causality.
Therefore, when the system loads Neo's consciousness into Mobil Avenue through the Source, it is not obligated to maintain Neo's exact RSI: his consciousness is being loaded into Mobil Avenue from the real world (the Source), where machines couldn't care less about some human's RSI. Contrast this to how Trinity enters Mobil Avenue, directly from the Matrix. She keeps her RSI inside of Mobil Avenue. Mobil Avenue was programmed with machines in mind, which is why Kamala says to Neo, "What are you doing here? You do not belong here."
In Mobil Avenue, Neo is given clothes that are very similar to what the Merovingian wears, and this is probably the Trainman's doing, as a way to honor the man he works for. More importantly, Neo is not given a choice to deny any part of the reality of Mobil Avenue like he (and redpills/potentials) can do in the Matrix - his anomalous code means nothing. That's why Neo was so helpless in the construct. It is all because of lack of choice.
Another interesting implication of the choicelessness of Mobil Avenue is that Neo may have died after an extended period of time in Mobil Avenue, the same way Agent Smith explains in M1 that "entire crops were lost" in the first two Matrix versions because humans were denied choice and woke themselves up into the real world.
When Neo exits Mobil Avenue, Link does not recognize Neo's code. That is because Link is reading an RSI from Neo that he has never seen before, an RSI that was forced upon Neo's consciousness. Even more interestingly, this is probably also because Link was looking at Neo the exile program rather than Neo the redpill human.
A user called "Captain Postmodernism" says:
As for the Source deleting Neo, that runs counter to the idea that the reason there are two doors is that the presence of choice must always exist. I believe you yourself brought up that agents don't kill people trying to escape the Matrix [see Matrix System: Natural Redpills]. So why would the Source reject Neo's choice? That would invalidate his power.
As my Natural Redpills page says, machines don't try to kill people as they are escaping. So, they don't take over people after swallowing a red pill, and they don't kill people when they're being picked up by hovercrafts. But notice that machines do try to kill Zionists once they've reached Zion. People who escape the Matrix do not yet know about the war - they are innocent. But once they reach Zion, every person is fair game for slaughter, as we see from sentinels hunting people down throughout all three movies. Agents are already trying to kill Neo in M1, as soon as he first goes into the Matrix to see the Oracle.
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