My question is, how can the inverse of $5 9 1 8 2 6 4 7 3$ be $3 5 9 7 1 6 8 4 2$? At first glance, 1 and 2 are both less than 3, for example, which seems to conflict with the instruction "then sorting the columns into increasing order". Is this not a total order over the natural numbers?
The reader should not confuse inversions of a permutation with the inverse of a permutation. Recall that we can write a permutation in two-line form $$\left(\begin{matrix} 1 & 2 & 3 & \cdots & n\\ a_1 & a_2 & a_3 & \cdots & a_n \end{matrix}\right)$$ the inverse $a'^1a'^2a'^3 ... a'^n$ of this permutation is the permutation obtained by interchanging the two rows and then sorting the columns into increasing order of the new top row: $$\left(\begin{matrix} a_1 & a_2 & a_3 & \cdots & n\\ 1 & 2 & 3 & \cdots & n \end{matrix}\right)=\left(\begin{matrix} 1 & 2 & 3 & \cdots & n\\ a'_1 & a'_2 & a'_3 & \cdots & a'_n \end{matrix}\right) $$ For example, the inverse of $5 9 1 8 2 6 4 7 3$ is $3 5 9 7 1 6 8 4 2$, since
$$\left(\begin{matrix} 5 & 9 & 1 & 8 & 2 & 6 & 4 & 7 & 3\\ 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 \end{matrix}\right)=\left(\begin{matrix} 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9\\ 3 & 5 & 9 & 7 &1 & 6 & 8 & 4 & 2 \end{matrix}\right) $$
— Knuth, Donald. The Art of Computer Programming: Sorting and Searching. Vol. 3, Second Edition.
The last step is to sort the columns $j\choose i_j$ in increasing order such that the column $1\choose i_1$ comes first, then comes $2\choose i_2$ and so on. Indeed, the wording is a bit misleading. The column $j\choose i_j$ stands for the assignment $j\mapsto i_j$ (here in the inverse permutation).