I didn't reply because there are some basic ideas like, space with more than 3 dimensions, space that is a "product" of two other spaces, space that is curled back on itself or has a complicated topology... which this discussion presupposes. And I'm not sure if you actually understand those concepts yet, and I do not have the energy to write an explanation for them. Perhaps someone else will. But I will answer your questions in a way that assumes an understanding of those ideas.
(1) String theory takes place in a space-time with nine dimensions of space and one dimension of time. Mathematically, a space-time which is a product of four-dimensional space-time with a six-dimensional Calabi-Yau is just one possibility for string theory. Mathematically, string theory can also take place in a space-time in which all nine dimensions are "large" (infinite, uncompactified), or in which the compact submanifold has less or more than six dimensions. The emphasis on spaces of the form M4 x CY6 (four-dimensional space-time "times" a Calabi-Yau) is because our physical space might be like that.
(2) Susskind is actually talking about the relationship between the 9+1 dimensions of a type of string theory ("Type IIA") and the 10+1 dimensions of M-theory. The discussion of a two-dimensional peanut butter sandwich whose third dimension (depth of the peanut butter) grows to visibility was just for visualization and discussion, but in reality we are talking about the appearance of an eleventh dimension at high values of the coupling constant.
So, in the ten-dimensional Type IIA string theory, among the objects in the theory are the fundamental string, and the D0-branes, branes which are just a point (zero-dimensional), heavy objects where a string can end. Then he says that for states of Type IIA string theory in which the string coupling is large, these two objects will begin to behave in ways as if they are moving out into an eleventh dimension.
The emergent eleven-dimensional space is actually "ten-dimensional space-time times a circle", and the radius of the circle is proportional to the ten-dimensional string coupling constant. So when the circle is extremely small, the string coupling is small. When the circle is big, the string coupling would be large, i.e. interactions would be strong; but it becomes simpler to switch to a dual description. This other description is eleven-dimensional, the fundamental string (a one-dimensional object) instead becomes a donut-shape wrapped along the new "circle" direction... a 2-brane, called an M2-brane since this is M-theory... and the D0-branes that move in ten dimensions become the gravitons of eleven dimensions.
Another way to look at this is to start in eleven dimensions with M-theory. M-theory contains M2-branes, M5-branes, and a supergraviton field analogous to the metric field in general relativity. If we consider M-theory on an eleven-dimensional space in which one direction is closed like a circle, and ask what happens to the theory if we shrink that direction until it is smaller than the branes, the answer is that we get Type IIA string theory in ten dimensions: an M2-brane that was wrapped around the eleventh dimension turns into a Type IIA string, and a supergraviton turns into a D0-brane. (Also, an M2-brane that wasn't wrapped around the eleventh dimension now appears as a D2-brane, but Susskind didn't mention that.) Finally, the size of the eleventh dimension shows up as the strength of the interaction between the strings.
That the D0-branes come from the d=11 supergravity field was new to me, somehow I had missed that in my own studies, I'll have to think about it further. Much of this material was put together in a famous
1995 lecture by Witten; Susskind may also be thinking of his own work on
the BFSS "matrix model" of M-theory.