A church numeral n, (say 2,) represents the "action" of applying any given function n times (here,two times) on any given parameter.
A church numeral, by definition, is a function that takes two parameters, namely
1) a function
2) a parameter or expression or value on which the supplied function is applied.
When the supplied function is the successor function, and the supplied second parameter is Zero , you get the numeral. (2, in the above example)
Church numeral 2 is by definition,
λf . λx . f( f( x))
,Which is obviously a function that takes two parameters.
On passing the successor function, i.e f(x)=x+1 as first parameter and zero as second parameter to the function, we get...
f(f(0))
=f(1)
=2
This explanation is kinda simplified as definition of successor function and zero aren't as shown, in lambda calculus..
Refer :http://www.cse.unt.edu/~tarau/teaching/GPL/docs/Church%20encoding.pdf
An excellent explanation on church encodings