This previous question had me thinking about something I've taken for granted. Consider $\mathrm{SL}_2(\mathbb{C})$ acting on $\mathbb{C}^2$, which descends to an action on the complex projective line $\mathbb{CP}^1$, which we may think of as the Riemann sphere $\widehat{\mathbb{C}}=\mathbb{C}\cup\{\infty\}$. It acts by Möbius transformations. By stereographic projection, $\widehat{\mathbb{C}}$ may be identified with a literal sphere $\mathbb{S}^2\subset \mathbb{R}^3$. So we get a handful of different spaces:
$$\Bbb C^2 \quad\longleftrightarrow\quad \widehat{\Bbb C} \quad\longleftrightarrow\quad \mathbb{S}^2 \quad\longleftrightarrow\quad \mathbb{R}^3 $$
One may restrict to the action of the special unitary group $\mathrm{SU}(2)$, and then clearly transport the action over to $\mathbb{S}^2$. But the acts of projectivizing and stereographic projection are very, well, nonlinear, so why in the world should we expect the result to be something that extends from $\mathbb{S}^2$ to a linear action on $\mathbb{R}^3$?
(I am placing $\mathbb{S}^2$ in $\mathbb{R}^3$ so that its intersection with the $xy$-plane is the unit circle.)
In order to verify that it does, presumably one could do a horrendous calculation, but it's easier to consider three one-parameter subgroups of $\mathrm{SU}(2)$ (corresponding to the standard basis of $\mathfrak{su}(2)$) correspond to coordinate plane rotations, which reduces to showing $\mathrm{SO}(2)\subset\mathrm{SU}(2)$ corresponds to a rotation around the $y$-axis. But even that seems like it would require some calculation I find myself unwilling to finish off.
More generally, $\mathrm{SL}_2(\Bbb C)$ acts by moving $\mathbb{S}^2$ around inside $\mathbb{R}^2$ between stereographic projection from and to the Riemann sphere. A nice, short video about this is Mobius transformations revealed. But what exactly is the connection between elements of $\mathrm{SL}_2(\Bbb C)$ preserving the complex inner product on $\mathbb{C}^2$, which strikes me as more algebraic than geometric, and extending to a linear map on $\mathbb{R}^3$?
Note: I believe something similar happens for $\mathrm{SO}(2)$ inducing an action on the real projective line $\mathbb{RP}^1\simeq\mathbb{S}^1\subset\mathbb{R}^2$ and $\mathrm{Sp}(2)$ inducing an action on the quaternionic projective line $\mathbb{HP}^1\simeq\mathbb{S}^4\subset\mathbb{R}^5$, where $\mathbb{H}$ denotes the quaternions. I suspect there will even be an octonionic version.
One guess I have is that the answer may come from groups attached to spaces with indefinite signature forms, in particular Minkowski spacetimes, but I haven't headed in this direction yet.
$O(3)$ is the isometry group of $S^2$ with its usual round metric, and it acts linearly on $\mathbb{R}^3$ for geometric reasons. So the question is why $SU(2)$ acts on the Riemann sphere by isometries for this metric. The answer is that $SU(2)$ preserves the Fubini-Study metric on the Riemann sphere, and moreover the stabilizer of a point acts transitively on the unit tangent space at that point.
I suspect this fact together with the fact that the action of $SU(2)$ is transitive implies that the Fubini-Study metric has constant curvature (necessarily positive by the Gauss-Bonnet theorem) and hence is the round metric up to a constant, but I'm not confident.
Note that when $n \ge 2$, complex projective space $\mathbb{CP}^n$ cannot possess a metric of constant curvature (by the Killing-Hopf theorem), and in particular the Fubini-Study metric is not such a metric, so whatever's going on here really is special to the case $n = 1$.