Sometimes people ask me, "What game design book would you recommend?" I received the question today, and in the spirit of sharing knowledge and making the most of each keystroke, I figured I'd make a short blog post about it.
My number one recommendation, with no hesitation, is Ian Schreiber's Game Design Concepts. It's not technically a book—it was a free online course offered through a blog before the "MOOC" term rose and fell in popularity—but it still has everything you want. Schreiber provides twenty chapters of escalating difficulty, exercises to challenge your knowledge, and plenty of references for those who want more on any particular topic. I participated in the Game Design Concepts project individually when it first came on the scene, treating it as an independent study rather than a community exercise. If you were interested, you could certainly find a cohort to read through it and review each others' work. Huge kudos to Schreiber for keeping the site open and free for so many years.
If you really wanted a book in the traditional sense, then I don't think you can really go wrong with Tracy Fullerton's Game Design Workshop. It is thoughtfully composed and contains many interesting anecdotes to go along with the more formal text. The numerous exercises are also quite good, and they are easily adaptable to individual or group implementation (as I recall). My only criticism of this book is that it too often falls into making generalized claims without acknowledging the underlying philosophy, presenting items as definitive without admitting that these definitions are subjective and arbitrary. If you wanted to illustrate this point—for example, in a game design course—you could easily pull up "MDA: A Formal Approach to Game Design and Game Research" by Hunicke et al. It presents a different formalist notion of what constitutes a game, definitions that conflict with Fullerton's, and this can lead to a healthy recognition of how little is established in the field. (You should read that article anyway, really, if you're interested in teaching or learning game design.)
My next recommendation may be a little controversial, but I really enjoyed reading Keith Burgun's Clockwork Game Design. In contrast to most other game design theorists, Burgun is unabashedly specific about what he means when he says "game." In particular, he is talking about interactive contests of ambiguous decision-making, where the decisions are endogenously meaningful, and there is a quantifiable outcome. So, if you're interested in writing interactive fiction or adventure games, this is probably not your next stop; however, if you are interested in reading a zealot's perspective of how to approach strategy game design, I think it's a thought-provoking piece.
There are several other books that I have read and could comment on, but those are the top three that I recommend. Schreiber is #1 for being comprehensive, thoughtful, and free. Fullerton is #2 for being accessible and action-oriented. Burgun is #3 for being focused and for challenging assumptions.