Andy T has noted that there's one small but significant difference between my edit and the edit that was ultimately accepted: the latter has no bold formatting of the final paragraph.
So the most likely scenario is that the OP has reviewed my edit, removed the double asterisks (either because they didn't want the sentence to be in bold, or more plausibly because they didn't understand what **
means in Markdown) but decided to adopt the rest of the edit, and the system has identified this as a "community reject".
bruglesco's helpful answer then points to where to find the actual mechanism for what has happened, although you have to read further in the full MetaSE post to find it. However, the puzzle is that none of the scenarios in that MetaSE post seem to describe what has actually happened in this particular case.
The three possibilities are:
1. A user with full edit privileges saves an edit over yours
If a user with full editing privileges for a post (including the
original poster) begins editing the post at the same time as you, and
they save their edit after you have already suggested it, then your
suggested edit will be overridden in favor of their fully-privileged
edit.
This is known in software as an optimistic lock. This is an edge case,
and does not happen often because users with full privileges who try
to edit a post after you submit your edit will be directed to your
suggested edit instead. Thus, when one person starts editing a post,
we do not need to lock everyone else out. While the UI attempts to
avoid these situations (by prompting you with "an edit has been made
to this post; click to load"), they do sometimes occur.
(Source: Why does the Community user approve and reject edits?)
The change timeline shows that there were about 2.5 minutes between my suggested edit being submitted and the OP rejecting that edit, so it's possible that the OP and I both had the edit page open at the same time. On the other hand, I didn't see any system message about another edit (as is supposed to happen), and it seems more plausible that the OP has simply responded straight away to an inbox notification of my edit (followed almost immediately by an inbox notification of my comment) and chosen one of the following two options...
2. What does the "Improve Edit" button do?
The Improve button allows reviewers to apply changes to the edited
version of the text, so they can make further changes. The revised
text is published when the improver saves their changes, and the edit
will be considered "approved".
- The change history records the suggested edit and the improved edit as separate events.
- The original editor still gets +2 reputation for their suggestion.
- The community user is given responsibility for the decision. Thus, no "approve" item appears in the "reviews" section of the improving user's activity tab.
For tag wikis, the "Improve Edit"
button is only presented to someone with the ability to make direct
edits that don't need reviewing (20K on graduated sites and 4K on
public beta sites).
Note that the "Improve Edit" button will prevent the author and
moderators from being able to override the edit.
(Source: How do suggested edits work?)
This option is ruled out since the revision history shows reject x1, and "the original editor still gets +2 reputation for their suggestion" did not apply. Which just leaves...
3. What does the "Reject and Edit" button do?
This rejects the suggested edit and allows the reviewer to edit the
version of the post without those edits. Once edited and saved, the
suggested edit will be considered "rejected".
- The change history records the reviewer's edit only and the suggested edit is discarded.
- The original editor does not get any reputation for their suggestion.
- The community user is given responsibility for the decision. Thus, no "reject" item appears in the "reviews" section of the improving user's activity tab.
Reject and Edit-s do count towards
editing bans. You may find some outdated posts saying otherwise, but
back then the reviewing UI was different and it wasn't possible to
distinguish between this case and an automatic rejection due to edit
conflict (see above).
For tag wikis, the "Reject and Edit" button is only presented to
someone with the ability to make direct edits that don't need
reviewing (20K on graduated sites and 4K on public beta sites).
Note that the "Reject and Edit" button will prevent the author and
moderators from being able to override the edit.
(Source: How do suggested edits work?)
This doesn't appear to be the mechanism, as the change history records the suggested edit which it's not meant to do if the suggestion is rejected. Also, if the suggestion was rejected, the OP would have lost both my edits and the explanation given for them.
Conclusion
While it seems improbable given there was no activity on the question for over 5 hours prior to my suggested edit, the only mechanism that appears to match the change history is the "simultaneous edits" option.
But why didn't I receive a message that the question was being edited? Could there be a system flaw in that SE gets confused if you open a question from within the Close Votes review queue and compose a comment, and you then open the same question in another window to enable you to edit it (because you like the question, you don't want it closed, the OP is new, and it's helpful to actually make the edit for them and post a comment on what you've done and what they can do), you submit the edit, then return to the question in the CVQ and vote to leave open. Maybe in that scenario, the system fails to notify if an existing edit is in progress or a new edit commences? Or maybe there's no simultaneous edit but the system gets caught between mechanisms #2 and #3 in this unusual scenario?
Well, I can't rule out the possibility that I simply didn't notice a system message. In any event, this Q&A can serve as a detailed log in case a similar situation arises for someone else in future...