What is the story or reason of how 龙 came from 龍? I'm just beginning to learn Mandarin and I have an excellent teacher. She tells me a lot of stories of how the characters came to be. Today we talked about the character for dragon, but she doesn't know how it changed so drastically from the traditional version to the simplified version. I'm very curious because the two characters are not at all alike.
TL;DR



Long Answer

From the oracle script to the seal script, character 龍 evolved from simple to complex. The seal script was already very similar to 龍.


However later, variants (there were too many!)  and 尨 appeared:


  Dictionary 集韻 (1037 AD)
  
  
    古作[...](帝+尨). 
    
    The ancient forms for 龍 are [...] (帝+尨) [...].
  
  
  
  
  Dictionary 金石文字辨異 (1810 AD)
  
  
    尨: 隋龍藏寺碑
    
    尨: appeared in the inscription of Longzang Temple (Sui Dynasty, 581–618 AD).
  
  
  


And after the establishment of the PRC, 尨 was further simplified to 龙.