Induction step: if we let P be the product from 1 to n-1, then the left-hand side of the inequality becomes P(1-x(n)). By induction, this is at least (1-S)(1-x(n)), where S is the sum corresponding to P. This product equals 1 - S - x(n) + Sx(n). Since Sx(n) is nonnegative this is at least
1 - S - x(n), which is the right-hand side of the desired inequality.
For the main argument, we have that the probability that all choices are different is 1(1-1/n3)(1-2/n3) ... (1-(n-1)/n3). By the hint, this is at least 1 - Q/n3, where Q is the sum of the first n-1 integers. Since Q < n2, the desired probability is at least 1 - n2/n3, or 1 - 1/n.
So for any instance I of 3-CNF-SAT, let T(I) be the union of {X(I)} and S(I), where S(I) is the set S that the text's transformation would construct for I, and X(I) is the value of X for I described above. To show that T(I) is equivalent to I, it's enough to show that T(I) has a solution iff S(I) has a subset summing to the target value t(I) for I.
First suppose that S(I) has such a subset S'(I). Then we may partition T(I) into S'(I) and T(I)-S'(I). Since T(I) sums to 2t(I), each subset will sum to t(I).
Conversely, if T(I) has a partition, let T'(I) be the subset of the partition that does not contain X(I). Then all members in T'(I) are members of S(I). Again, since T(I) sums to 2t(I), T'(I) must sum to t(I), so T'(I) gives a solution to the subset sum problem.
. Finally, to show that the partition problem is in NP for an input set of n elements, we need only make n binary guesses about whether to include each item in the first subset of the partition. The sums of the two subsets may be found by making O(n) additions, each taking time polynomial in the size of the instance. Since n is polynomial in the size of the instance, and since comparing the two sums requires only time polynomial in the size of the instance, this nondeterministic solution algorithm has polynomial time complexity. So the partition problem is in NP.