The author skips the (standard) construction of numbers in lambda calculus,
the so-called Church numerals C0,C1,C2,... which iterate a given function a certain number of times on a given argument. So
C0 f x => x
C1 f x => f x
C2 f x => f (f x)
Curiously, for these numbers, you can define the factorial function without any use of recursion, instead using their built-in iterative behaviour.
Written in the standard notation for lambda calculus, it is factorial = λn.λf.n(λf.λn.n(f(λf.λx.n f(f x))))(λx.f)(λx.x)