There are at least three useful ways of thinking about the ego and how it is generated. One is the static: this is the sense of the subject, of the "I," that is generated whenever you have an experience. The I is generated from and contrasted to the not-I. The I here is a mass of unconscious and unseen assumptions. Self-inquiry and surrender discern away these assumptions, leaving the I by itself, whereupon it disappears.
The second view is the dynamic: this is the sense of the "I" that is generated by the motion of thought. Thought by flowing creates the hallucination of a stable perceiver OF those thoughts. If this motion is slowed down or stopped, that hallucination can be seen for what it is. Self-inquiry and surrender concentrate the mind, redirecting it away from its usual desire-and-fear focused movement, thereby slowing and even stopping it.
The third view is the structural view of the ego: this is the fact that the content of our thought all refers to a self-image, and is validated by all the other thoughts referring to the same image. These form a kind of web or net of mutually reinforcing illusion. Spiritual pointers like the simple question "Who am I?" or the image of the ego as being like a dream try to gesture one away out of this web.