Why is this the answer?

The answer is space because this super clever riddle is playing a fun trick with words that have more than one meaning! The word "space" is special because it can describe something super huge and something very tiny all at once. This is a common way that great riddles try to confuse you, by using a single word for two very different ideas. First, let's think about the part that says "What surrounds the world?" This clue is talking about outer space, which is the big, endless area beyond our Earth where the planets, stars, and moon float. This is the amazing universe that goes all around our world, holding everything in place. When you look up at the night sky, you are looking at all of that black, vast space. It is so big, it seems to go on forever! It truly surrounds everything we know. Now, let's look at the second part, which is the trickier clue: "yet dwells within a thimble." A thimble is a very, very small metal cup that grown-ups use to protect their fingers when they are sewing. It is just big enough to fit on the tip of your finger, so how can a whole universe fit inside? The secret is to think about the empty area inside the thimble. Even though a thimble is small, the empty air or the volume inside of it is still called "space." Whenever you have an empty container, like a cup, a box, or even a little thimble, what fills the inside? It is empty space! The word "space" is used to describe the biggest thing we know, the universe that surrounds the Earth, and the small, empty area inside a thimble. Because the same single word, "space," works for both the great big outside world and the little tiny inside of the thimble, that is why it is the perfect answer to this awesome riddle!