I can't offer much more insight (if I have at all this far). The above def is how ordinal numbers are built, and I think THERE it will prove more valuable (probably worth a quick Wikipedia read when you see the term used, as I don't think he went into them as much as you'll want).
It's an attempt to put the standard math systems we know and love into a unified set theory model, and then you can worry about what exactly set theory is I guess.
Wish I had better answers