That's not what it says: suppose that $d_X(x,y) < \delta$ for two arbitrary points of $X$. It might have been less confusing for you if the proof had said: "let $x,y$ be two arbitrary points of $X$ such that $d_X(x,y) < \delta$" instead:
Reason: we want to show
$$\forall x,y \in X: d_X(x,y) < \delta \implies d_Y(f(x),f(y)) < \varepsilon$$
so we start by assuming we have two points in $X$ that are distance $< \delta$ apart, and these must be _arbitrary points_ with that property, it doesn't mean that all points of $X$ are $< \delta$ apart, but if we happen to have any two that are, we must show that the distance of their images is $< \varepsilon$.