I'll help you with continuity example. First, that is not the only solution to the question. In some textbooks, you learn how to deal with limits of squared functions and limits of reciprocals and as long as you can keep your head straight, you can choose an appropriate delta by combining parts of the definitions of those two types of limits.
You don't know how to choose the delta beforehand. The best way is to start with the last step in the proof in the attachment. The only way to choose an appropriate delta is to estimate \left|f(x) - f(x_0)\right| as follows:
\left|f(x) - f(x_0)\right| \leq \left|\frac{1}{x_0 ^2} - \frac{1}{x^2}\right| = \frac{\left|x_0 ^2 - x^2\right|}{\left|x_0 ^2 x^2\right|} = \frac{\left|x_0 - x\right|\cdot\left|x_0 + x\right|}{x_0 ^2 x^2}.
We have control over \left|x_0 - x\right|, so we need to estimate the other terms. On the one hand, \left|x - x_0 \right| < \delta implies that x - x_0 > -\delta or x > x_0 - \delta. Since x_0 is positive, we might as well ensure that x is positive by letting \delta \leq \frac{x_0}{2} (note we could choose \frac{x_0}{4} or something similar, but half of x_0 is convenient). Hence x > \frac{x_0}{2}, and we have a bound for the term \frac{1}{x^2} since
\frac{1}{x^2} < \frac{4}{x_0 ^2}(*).
On the other hand,
\left|x - x_0 \right| < \delta \leq \frac{x_0}{2} \Rightarrow x - x_0 < \frac{x_0}{2} \Rightarrow x < \frac{3x_0}{2}\mbox{ so }\left|x_0 + x\right| = x_0 + x < \frac{5x_0}{2}. (**)
Consequently,
\frac{\left|x_0 - x\right|\cdot\left|x_0 + x\right|}{x_0 ^2 x^2} = \left|x_0 - x\right|\cdot\left|x_0 + x\right|\cdot\frac{1}{x_0 ^2}\cdot\frac{1}{x^2} \leq \left|x_0 - x\right|\cdot\frac{5x_0}{2}\cdot\frac{1}{x_0 ^2}\cdot{4}{x_0 ^2} = \frac{10}{x_0 ^3}\left|x_0 - x\right|,
where the only inequality follows from (*) and (**). That's basically it, except you want delta to satisfy another inequality to ensure that the last expression is less than epsilon.