Steenrod operations are an example of what's known as a power operation. Power operations result from the fact that cup product is "commutative, but not too commutative". The operations come from a "refinement" of the operation of taking $p$th powers (squares if $p=2$), whose construction rests on this funny version of commutativity.
A cohomology class on $X$ amounts to a map $a: X\to R$, where $R = \prod_{n\geq0} K(F_2,n)$. So the cup product of $a$ and $b$ is given by $$ X\times X \to R\times R \xrightarrow{\mu} R.$$$$X\times X \to R\times R \xrightarrow{\mu} R.$$ In other words, the space $R$ carries a product, which encodes cup product. (There is another product on $R$ which encodes addition of cohomology classes.)
You might expect, since cup product is associative and commutative, that if you take the $n$th power of a cohomology class, you get a cohomology class on the quotient $X^n/\Sigma_n$, where $\Sigma_n$ is the symmetric group, i.e., $$X^n \xrightarrow{a^n} R^n \rightarrow R$$ should factor through the quotient $X^n/\Sigma_n$. This isn't quite right, because cup product is really only commutative up to infinitely many homotopies (i.e., it is an "E-infinity structure" on $R$). This means there is a contractible space $E(n)$ with a free action of $\Sigma_n$, and a product map: $$\mu_n' : E(n)\times R^n\to R$$ which is $\Sigma_n$ invariant, so it factors through $(E(n)\times R^n)/\Sigma_n$. Thus, given $a: X\to R$, you get $$P'(a): (E(n)\times X^n)/\Sigma_n \to (E(n)\times R^n)/\Sigma_n \to R.$$ If you restrict to the diagonal copy of $X$ in $X^n$, you get a map $$P(a):E(n)/\Sigma_n \times X\to R.$$
If $n=2$, then $E(2)/\Sigma_2$ is what Hatcher seems to call $L^\infty$; it is the infinite real proj. space $RP^\infty$. So $P(a)$ represents an element in $H^* RP^\infty \times X \approx H^*X[x]$; the coefficients of this polynomial in $x$ are the Steenrod operations on $a$.
Other cohomology theories have power operations (for K-theory, these are the Adams operations).
You can also describe the steenrod squares directly on the chain level: the account in the book by Steenrod and Epstein is the best place to find the chain level description.