The goblins saw a different thing. The demons appeared as the warped reflections of the human mages who had once experimented on their ancestors. Even goblins mages who knew nothing of their race past for some reason were overwhelmed with dread from the appearance of the mages. They saw the disdain and smirk at the mages lips, looking down on them like toys to play.
They felt naked under this gaze, as the mages "Demons" got closer, they took a step back in fear. They felt like their thought was no longer their own. The overwhelming feeling was one of being outwitted and outmatched on a fundamental, genetic level by the very beings who had once enslaved them and made them what they were.
For the ratfolk, it was like their hidden thoughts about what the empire had in mind for them came through. The demons to them appeared as the empire army ready to kill and erase their race.