Number of Players: At least one referee and from four to fifty players can be handled in any single campaign, but the referee to player ratio should be about 1:20 or thereabouts.There are a lot of ways to read this. One is to assume that the 1:20 ratio is an atavism, a throwback to the way the wargames out of which D&D had grown were played. Another is to treat it as a guess based on how the authors believed the game would be played. Yet another is to see it simply as a reflection of the experiences of Gygax and Arneson, whose home campaigns included exceptionally large numbers of players by today's standards.
What I find interesting is that most interpretations of this passage take it as given that the 1:20 ratio is no longer tenable; it's at best an artifact from another time. There's a lot to support this notion. In my three decades (!) of playing this game, I never had more than 8-10 regular players at my table and the norm was usually 4-6. Back in the faddish days of the hobby, I participated in pick-up campaigns that were run at local game stores or at "game days" sponsored by public libraries. Those campaigns often had close to 20 people participating in them. I remember one rather fun campaign run at a library, which used this giant conference table to seat us, with the referee seated at one end -- the chairman's position -- and the bunch of us players on the other seats. It was a lot of fun and far less chaotic than one might expect, but that probably had a lot to do with the referee, who was a grognard of the original sort, well-known for his lengthy and well-organized wargames campaigns.
Reading that passage now, I don't think it's meant to be understood that there'd be 4-50 players participating in any single session at the same time. Rather, I suspect the idea is that a campaign, encompassing many sessions over many different days, might encompass that many players. The assumptions seems to have been that there'd be many different groups of players, all of whom shared a referee and whose adventures all took place within the same world. One of the reasons why the early megadungeons may have been so huge was to accommodate multiple groups of adventurers tramping through them on a regular basis. These places had to be big or else the referee would soon find himself without anything to occupy his many players.
I've long wanted to be able to run a campaign along similar lines, but I've never had enough players to make a serious go at it. I think it's a pity really, since this style of play had a big influence on the early development of the game. Understanding the dynamics of having several adventuring groups in the same campaign is knowledge many of us don't possess and I think it skews our understanding of the hobby's origins and subsequent growth. Unfortunately, I'm not sure this style could be recreated easily nowadays. The older campaigns drew heavily on already-existing game clubs, things that, in my experience anyway, are much rarer now than they used to be. The pool of available gamers is still quite large, but they seem to be more diffuse and insular than they were back in the day (again, at least in my experience).
Still, it's an intriguing thought.