Why is this picture an example of a $1$-dimensional manifold?
My thought process is: the circle must have a point removed from it because otherwise it would be self-intersecting, and self-intersection isn't a property of manifolds? Is that correct reasoning? So a circle with all its points isn't a manifold?
Is this property true for all manifolds, or for those only in $\mathbb{R}^n$?

A circle with a point removed from it, as in your picture, is actually homeomorphic to $\mathbb{R}$: for each point $S'$ on this "punctured circle", there is a corresponding point $S$ on the real line $\mathbb{R}$, and vice versa, as shown in the following picture:
This correspondence, called stereographic projection, is a homeomorphism. So the punctured circle is equivalent to the simplest 1-dimensional manifold, which is $\mathbb{R}$.
The (complete) circle $S^1$ can be seen to be a 1-dimensional manifold because you can write $S^1 = U\cup V$ where $U$ and $V$ are two open subsets each homeomorphic to $\mathbb{R}$: just choose two different points $x$ and $y$ and let $U = S^1\setminus\{x\}$ and $V = S^1\setminus\{y\}$, which are homemorphic to $\mathbb{R}$ using the above pictorial argument.