I was wondering if someone could help me understand this proof that my professor gave us:
I get lost just after he defines the components of G - xy - S. For example I can't really see how G[x] must have x and G[y] must have y. Even if I skip this detail I don't understand how the rest of the proof flows.

We know that $G-S$ is strongly connected, but that $G-S-xy$ is no longer strongly connected. Thus, $G-S-xy$ has 2 strongly connected components and there is no other edge from the component containing $x$ into the component containing $y$. Denote $X$ the set of vertices of the component of $G-S-xy$ containing $x$, and denote $Y$ the set of vertices of the component of $G-S-xy$ containing $y$. Then $V(G)=X\cup Y\cup S$ (there was a typo in the proof at this point) an these unions are disjoint.
If $|X|\geq 2$, we notice that $S\cup\{x\}$ is a vertex cut of $G$ : if let $x'$ be another vertex (other than $x$) in $X$. Then any path from $x'$ to vertices of $Y$ must go through either $S$ or through $x$, as $xy$ is the only edge between $X$ and $Y$. Similarly, if $|Y|\geq 2$, then $S\cup\{y\}$ is a vertex cut of $G$. In both cases, we have found a vertex cut of $G$ of size $|S|+1=\kappa(G-xy)+1$.
The only other case to verify is when $|X|=|Y|=1$. Then $|S|=n(G)-|X|-|Y|=n(G)-2$, in which case $\kappa(G)$ must be $n(G)-1$ by the inequality from the beginning of the proof. Thus, to disconnect the graph, we must remove all vertices (except one) : the graph $G$ must be complete. We can disconnect $G-xy$ by removing all vertices except $x,y$ : this vertex cut has size $n(G)-2$.