Hou Niao was somewhat excited. This was the very purpose of his trip here: to witness all sorts of strange and unusual methods within the Cultivation World—something he would never encounter if he stayed at home.
Phantom Beasts lie in a transitional stage between real demons and Primordial Soul Beasts. Yu Kuohai is a Sea Beast—back on Crab Claw Island, the sea leeches he encountered were Primordial Soul Beasts. Between them lie a type of existence that doesn't stand on its Primordial Soul, but instead on its Dharma Form—it's called a Phantom Beast.
The very creation of the Phantom Beast species was to cater to Tongtian Realm cultivators, making it easier for them to master, control, and cultivate; whereas Primordial Soul Beasts are the domain of cultivators above the Golden Core.