Sources
Persian sources are used wherever possible, but most of what we know about Cyrus comes from Greeks. Remember that what Persians say might be propaganda, and that Greeks were enemies. You can find an explanation of how we know what we know about the Achaemenids on this page:
How do we know about the ancient past of Iran?
From Anshan to Lydia

The Cyrus Cylinder in the British Museum
Let Cyrus introduce himself:
I, Cyrus, king of the universe, mighty king, king of Babylon, king of Sumer and Akkad, king of the four quarters, son of Cambyses, great king, king of Anshan, grandson of Cyrus, great king, king of Anshan, descendant of Teispes, great king, king of Anshan...
This is part of the inscription on the “Cyrus Cylinder” made of baked clay and written in Akkadian, the language of the Assyrians and Babylonians, not Persian, which Cyrus spoke.
Apart from what Cyrus tells us, we actually know nothing at all about his ancestors. The royal family that ruled Persia is often called the Achaemenids, which means the descendants of Achaemenes. Cyrus never mentions Achaemenes: he appears in the inscriptions set up by Darius, as a common ancestor of them both, and the father of Teispes. It's possib;e that he formed an alliance with the powerful Persian Achaemenid family through his marriage to Cassandane, described by Herodotus as "daughter of Pharnaspes, an Achaemenid". This would also have helped Cyrus in the unification of the various tribal entities of Iran: a necessity for one who was to challenge Medes, Lydians and Babylonians.
Cyrus’ cylinder celebrates his capture of Babylon in 539 BC, and shows him confident and (as, and we shall see) generous in his success. But the capture of Babylon was the climax of his reign: before he could tackle the mighty Babylonians, the super-power of their day, there were others he had to deal with...
First: the Medes
The Medes were close relatives of the Persians. Their home territory was north of Elam, which the Persians probably already controlled. For their earlier history, see here. A Babylonian chronicle gives us the basic facts:
Astyages [king of the Medes] mustered his army and marched against Cyrus, king of Anshan. The army rebelled against Astyages and took him prisoner. They handed him over to Cyrus. Cyrus marched to Ecbatana, the royal city. The silver, gold and other goods which he carried off, he took back to Anshan.

Herodotus
That’s all. We have to guess why Astyages attacked Cyrus, and why his army turned against him. The Greek historian Herodotus has a more exciting account, and tells us that the Persians were ruled by the Medes, and that Cyrus wanted to break free. He even invents a speech which he says Cyrus gave to his army, after he’d laid on a massive feast for them all:
Obey me and be free. I believe it is my destiny, decided by god, that I should be given this opportunity. I believe we are as good as the Medes, especially in warfare. As this is so, let us break with Astyages once and for all.Herodotus, Histories 1.126
Herodotus adds that the captured Astyages was not punished, but Cyrus kept him with him until his death. The Medes and Persians were henceforth united - Greek historians use "Medes" to mean "Persians" - and the two peoples shared in the administration of the new empire.
Second: the Lydians 547 BC

The river Halys had been the frontier between Astyages’ Media, and the territory ruled by Croesus, king of Lydia.[See map.] Croesus was the brother-in-law of Astyages. Croesus’ kingdom was immensely wealthy (people still use the expression “rich as Croesus”). This probably had a lot to do with the invention of coined money (see below). Croesus’ capital was a long way to the west, at Sardis, not far from the Aegean Sea. This was important because when Cyrus got involved in Lydia, the Greeks began to be aware of Persia for the first time.
Croesus was very unhappy at Cyrus's activities in Media. He decided to attack him, but, according to Herodotus, first he wanted to be sure that his attack would be successful. To find out the future, you needed to consult an oracle [where men could ask the gods questions about the future]. But which oracle? There were lots. And what if they disagreed with each other?
Croesus (according to the Greek historian Herodotus) decided on a test to find out which one was best. He sent men to each; they were told to wait exactly 100 days, and then ask the oracle a simple question. “What is Croesus, king of Lydia, doing today?” When he had all the reports, he eagerly opened them. Only the oracle of Apollo, at Delphi in Greece had this answer:
A smell has reached my senses of a hard-shelled tortoise
Herodotus 1.47-48
Being boiled in a bronze cauldron, with the flesh of a sheep.
Delphi had got it right. Croesus was boiling a tortoise and a lamb together in a bronze pot. He was mightily impressed. He sent the oracle the most amazing gifts (it takes Herodotus a page and more to describe them all) and then asked the question he really wanted the answer to. “What will happen if I invade the empire of Cyrus?”
If you cross the river Halys you will destroy a mighty empire. Herodotus 1. 53 -54

Delphi, Temple of Apollo
Croesus was overjoyed. The Delphic oracle always spoke the truth (he’d checked), and Croesus gave every man in Delphi two gold pieces to reward them: but the mighty empire he destroyed was his own. He crossed the river Halys, invaded Media, and waited for Cyrus, who had to march 1200 miles to face him. But the battle was too close to call, and Croesus returned to Sardis, assuming that was it, until next season (no one went to war in the winter).
But Cyrus had two nasty surprises for him. He followed Croesus home with amazing speed; Croesus only just had time to get his army ready to defend Sardis. And then Cyrus unleashed his secret weapon: camels! Their smell made Croesus' horses panic, but most of the army managed to scuttle back into the city.
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Sardis, the citadel
Sardis (left)was supposedly impregnable, and for two weeks Cyrus got nowhere, despite offering a reward to the first man to get over the walls. But then the Persians had a lucky break. A defender's helmet fell off, and came bouncing down over the rocks. Amazingly its owner came after it, collected it, and scrambled back up. His climb had been closely observed, and next day, the Persians attacked using the same route. Thus Cyrus captured Sardis. According to the Greek story, Croesus was condemned to be burned alive, but Apollo took pity and put out the fire. More probably it was a suicide attempt, which Cyrus, not Apollo, interrupted: Cyrus' policy was to show mercy to conquered rulers so they could help him with governing their former kingdoms. Croesus remained as a valued advisor to Cyrus and Cambyses, in all likelihood. But the Ionian Greeks' absorption into the Persian empire was under way - with repercussions that were to take nearly a century to show themselves..
Cyrus was overwhelmed by the lifestyle that Croesus had enjoyed, and no doubt he realised how comparatively little in the way of luxury he had enjoyed so far. In time, the Persians were to become proverbial for their luxurious lifestyle: this was something that only began after the conquest of Lydia. Sardis became Cyrus' western capital - and he took many of its craftsmen (Greeks and Lydians) back to Persia to work on his own new palace at Pasargadae. An important innovation that was borrowed from Lydia was the idea of coinage, which had probably been invented by the Lydians' Greek neighbours around 600 BC. Lydia was quick to seize on the advantages of a money-based economy. Coined money was something entirely new in the ancient world, and was one of the things that helped hold the Persian empire together. The idea of a single currency throughout the world was something developed later by Darius, as we shall see.

Lydian coin made of silver; issued before 600 BC.

Not the Cyrus Cylinder: Nabonidus,the current ruler of Babylon, which Cyrus was to attack next, left a number of cylinders, of which 5 have been found. The inscriptions commemorate his repairs to temples, and ask the gods to help his son Belshazzar.