Another "only-in-
Lovecraft" word, its seemingly intended meaning is "having a head like that of a horse" though its literal reading comes across as the increasingly-nonsensical "having a horse for a head."
(Of course, only in Lovecraftian texts could having a horse for a head be ridiculous and having an octopus for a head be terrifying...)
The word is only ever applied in description to the monstrous shantak-birds of the Cold Wastes north of Inquanok, present in the Dream-Quest of Unknown Kadath and virtually nowhere else - a Google search of "hippocephalic" turns up a single mighty mirrored entry describing what seems to be a heraldic shantak.