Steve Mollmann wrote:
^ It's far from obvious: http://www.youtube.com/watch?v=7y8uNMPJfwQ
When the "mysterious" faces begin flashing, Morbius is ranting that the Doctor is losing. It's not very clear as transmitted why the Doctor wins when he does, though.
It's very clear, I thought: Morbius loses because the stress of the game causes a 'fuse' to blow in the artificial head housing his brain, and that was the Doctor's plan in challenging him to a mind-duel the Doctor couldn't hope to win in the first place, as set up by some earlier lines about how crude the artificial braincase is, and the dangers of it overloading*.
Watch the episode cold, without importing any other continuity (apart from the fact that Time Lords change their faces occasionally) and there's no way to interpret the scene except that the appearance of the Doctor's earlier faces shows he's losing, and that the faces seen after Hartnell are pre-Hartnell Doctors.
Anything else is retconning to try to reconcile the scene with the rest of continuity. Like we do.
*Edit: Here's the lines, at least as Terrance included them in the book (without checking the DVD I can't be sure he didn't add them to clear things up):
"Solon, you spoke once of constructing an artificial brain case."
"I abandoned that project long ago. There were problems... formidable problems. There was a build-up of static electricity withing the cranial cavity. At times of stress it could have earthed through the brain, upsetting the delicate equilibrium, disturbing the neural centres."
Then, after Morbius has ordered Solon to find and use it, "Oh, it wouldn't do, Morbius. There could be severe pain, seizures, perhaps even madness..."