Phase displacement armor is a type of equipment worn by Cybertronians that allows them to be immune to damage caused by physical attacks.
When Bumblebee used a Cortical psychic patch to enter into Megatron's mind, he faced the Decepticon warlord himself. As Megatron attempted to destroy Bumblebee, he discovered that his physical attacks simply passed through the Autobot's body. This only confused Megatron for a moment as he assessed the different means by which this could be possible; he determined that his foe was not wearing Phase displacement armor, was not using holograms (as his eyes tracked his movements), and was not a ghost, as Megatron did not believe in spirits. As such, the Decepticon leader concluded that Bumblebee had intruded into his very mind, forcing the scout to try different means of achieving his goal.