What's the inductive hypothesis here?

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This question pertains to the proof mentioned in this question. What is the inductive hypothesis here? As I can decipher it, it seems like:

If $i$ is the number of terms in 2-cycle identity permutations and $i<r$ then $i$ is even.

Can someone verify this? Or if wrong mention the correct hypothesis.

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This is an example of what is sometimes called strong induction. The hypothesis of strong induction is that the theorem is true for all values less than $r$. One place you see the strong induction hypothesis used is where it says "By induction, $r-2$ is even; hence, $r$ must be even." Your statement does, indeed, appear to be identical to the strong induction hypothesis.