Meaning of the notation Typ := TVar | (Typ → Typ)
Intuitively, a type variable is like a variable in an expression, except that it stands in for a type rather than standing in for a number/bitstring/etc.

Formally, we choose a countably infinite set $\mathsf{TVar}$, and then define a type variable to be a member of $\mathsf{TVar}$.

The notation $\mathsf{Typ}:=\mathsf{TVar}|(\mathsf{Typ}\to \mathsf{Typ})$ is an instance of Backus normal form.  It is an inductive definition of $\mathsf{Typ}$.  It says that if $\alpha$ is a type variable (i.e., if $\alpha \in \mathsf{TVar}$), then $\alpha$ is an element of $\mathsf{Typ}$; and if $\alpha,\beta$ are type variables (i.e., $\alpha,\beta \in \mathsf{TVar}$), then the term $\alpha \to \beta$ is an element of $\mathsf{Typ}$.  $\mathsf{Typ}$ is the set of terms that can be constructed in this way.  We call a term a type if it is an element of $\mathsf{Typ}$.