Here's the definition of a limit that I was taught: $\displaystyle \lim_{x \to a} f(x) = L$ means:
$\forall \varepsilon > 0, \exists \delta > 0$ such that
$0 < \mid x - a\mid < \delta \to \mid f(x) - L\mid <\varepsilon $
- In the following picture, why doesn't the limit exist at $a_1$ based on the definition of a limit?
Simply because $f(x)$ is not defined on the given interval?
- Can the definition be written as: $\mid f(x) - L\mid < \varepsilon \Rightarrow 0 < \mid x - a\mid < \delta$?
Basically, why is the equality one way and not two ways (iff)? If you want to specify how close you want $f(x)$ to be to $L$, then find out how close $x$ needs to be to $c$ in order to guarantee it, why does the delta part imply the epsilon part? This seems a little un-intuitive.

You have two questions here:
Question 1
To say $\lim_{x\to a} =L$ we need $|x-a|\leq \delta \implies |f(x) -L|\leq \epsilon$ for all $0<|x-a|<\delta$.
Let's define $x_l, x_r$ as the closest values of $x$ to $a$ where $f(x)$ is defined, when approaching from the left and right, respectively.
If we want to say $L=f(x_l)$ then for any $\epsilon > 0$ we need to find a $\delta >0$ so that $|f(x)-L| < \epsilon$ if $0<|x-a|<\delta$. However, we can see that if $\delta < |a-x_l|$ then $f(x)$ is not defined for any $x \in |x-a|<\delta$. If $\delta>|x_l-a|$ then $f(x)$ is not defined for any $x\in (x_l,a)$ so we fail to satisfy the definition (there is no "get out of logic free" card for undefined points ;-)
Question 2
If we changed the definition to be
$$\lim_{x\to a} =L \text{ when }$$ $$ \forall \epsilon > 0\;\exists \delta > 0: 0<|x-a|\leq \delta \iff |f(x)- L| \leq \epsilon$$
Then any function that is not strictly monotonic would fail to have a limit, since $|f(x)-L|< \epsilon$ could happen at two disjoint intervals of $x$.