s = Lazy man's sigma.
I don't know why the author explains it the way he does. It's like he doesn't want to refer to a picture to explain the reasoning. So instead you have to follow the algebra which is more complicated. Perhaps I am missing something.
First of all, s=sigma is not defined by that formula with 1-t in the denominator. It is defined to be the initial x value along the characteristic (i.e. the x-intercept). That is, it is a parameter for the Cauchy surface.
Take 0<=s < 1. Then the corresponding characteristic is
x= (1-s)t + s.
That is a straight line with x intercept = s and positive slope. At t=1, x=1 (by substitution).
Similarly, if -1<s<0, the characteristic is
x = (1+s)t+s.
Its x intercept is s and also has positive slope. Again by substituting t=-1, you find that it passes through the point (-1,-1).
If you draw all these possible lines, then you can see that there are three types. The horizontal ones outside the band. The ones to the left of x=t (inside the band) which have positive x intercepts and which pass through (1,1). And the ones to the right of x=t (inside the band) which have negative x intercepts and which pass through (-1,-1). So given any point (t,x) inside that band, you can recover s by first checking which region of the band you are in (x>t or x<t), and then finding the slope to the corresponding point (1,1) or (-1,-1).
Now there is a question of how to define u(t,x) at points (t,x) which lie on more than one of these lines. For example the point (3,2) lies on three different lines in this system of lines. The simplest thing is probably to just think of u(t,x) as a multiple valued function. u(3,2) would have three different values. u(-1,0) would just have one value because there is only one characteristic passing through that point.
Or you can choose to define u(t,x) at these points by some scheme of your choosing. For example, think of u(t,x) as a wave radiating from the Cauchy surface t=0. Then let u(t,x) be the "closest" value from the Cauchy surface. For example, the point (3,2) is on the characteristic x=2 (which starts at (0,2)). And it lies on the characteristic that started at (0,1/2), and it lies on the characteristic that started from (0,-1/4). That gives three possible values: 0, 1/2, 3/4. The "closest" value would be 0, which came from the point nearest of the three points, (0,2). By that scheme the value of u(3,2)=0. Similarly u(1,1)=0.