In the context of this chapter, I think McLuhan is suggesting that dulling is a result of the displacement. By not being conscientious of technology's implications, human functions that are traditionally expressed without technological augmentation become unconsciously linked to the new technology. In turn, the part of the 'real self' that corresponds to said function becomes dulled.

All media, from the phonetic alphabet to the computer, are extensions of man that cause deep and lasting changes in him and transform his environment. Such an extension is an intensification, an amplification of an organ, sense or function, and whenever it takes place, the central nervous system appears to institute a self-protective numbing of the affected area, insulating and anesthetizing it from conscious awareness of what’s happening to it. It’s a process rather like that which occurs to the body under shock or stress conditions, or to the mind in line with the Freudian concept of repression. I call this peculiar form of self-hypnosis Narcissus narcosis, a syndrome whereby man remains as unaware of the psychic and social effects of his new technology as a fish of the water it swims in. As a result, precisely at the point where a new media-induced environment becomes all pervasive and transmogrifies our sensory balance, it also becomes invisible (source).

I think a similar sentiment is expressed well here, albeit in a different context:

As is commonly perceived, the relationship between a human operator and a machine is such that the machine is a tool, an instrument of the composers desires. Implicit in this, and generally unquestioned until recently, is the sovereignty of the composer. What is now becoming clear is that the composer is as much a tool as the tool itself, or even a tool for the machine to manifest its desires. I do not mean this in the sense that machines are in possession of a mind capable of subtly directing human behavior, but in the sense that the attributes of the machine are just as prominent an influence in the resulting artifact as the user is; through his work, a human operator brings as much about the machine to light as he does about himself (source).