Thank you for this explanation! The construction is so elegant, and in a way, the basic idea is simple (?) -- I wonder why it wasn't thought up of much earlier than it was. Maybe it's a little bit like https://en.wikipedia.org/wiki/Egg_of_Columbus

Not only is the basic idea simple, it's a sort of generalization of two other things that were already well known but before Conway were thought of as completely independent.

First: the construction of the real numbers from (traditionally) the rational numbers by means of "Dedekind cuts" (sometimes called "Dedekind sections"). The idea is that if you're trying to build up the machinery of mathematics from scratch, it's not too hard to go step by step from (say) sets to nonnegative integers to integers to rational numbers, but it's harder to get from there to the real numbers, and Dedekind's idea is to say that e.g. the square root of 2 is the way of chopping the rational numbers into "things less than the square root of 2" and "things greater than the square root of 2".

Second: the construction of the ordinal numbers (a sort of generalization of the notion of "nonnegative integer" that allows the numbers to get very infinite) due to von Neumann: you start off saying that zero "is" the empty set, and then you repeatedly say: the next ordinal "is" the set of all the ordinals you've constructed so far. So, e.g., 1 = {0}, and then 2 = {0,1}, etc. -- but once you've constructed all the nonnegative integers you can then look at {0,1,2,...} and that's a new ordinal typically called ω, and then you can take {0,1,2,...,ω} and call it ω+1, and so on and so forth.

Both of these are special cases of what Conway does: Dedekind's is the case where all the numbers are rational numbers and you don't allow either set to be empty, and von Neumann's is where you _require_ the right-hand set to be empty.

There's a further connection, which I believe is how Conway found these things in the first place: if in the definition of surreal numbers you delete the requirement that everything in L has to be less than everything in R, then what you've got is (more or less) the definition of a position in a two-player game. L is the set of positions one player can move to, R is the set of positions the other player can move to. (I say "more or less" because e.g. in many games you're allowed to repeat positions, and games may have complicated winning conditions or involve chance or whatever.) And there's a whole rather nice thing called "combinatorial game theory" that's all about these, and from that perspective numbers are just one particular kind of (position in a) game. (Specifically, a number is a game in which at no point in the subsequent gameplay can it ever make your position better for you to make a move: you'd always rather pass if you could.)