In the image below (part (b)), Since $z < |3|$ before the transformation, does that simply imply that the region to be shaded after the transformation is definitely the inside of the circle and not its outside? It seems so to me but I don't want to jump to the conclusion.
Also is the convention to use dotted lines for the locus of the circle, since $z < |3|$ as opposed to $z \leq |3|$ ?

If $|z - (-i)|$ is very small, then $|w|$ will be very large. In fact, within a certain neighborhood of $-i$, the closer $z$ is to $-i$, the larger $|w|$ is. This implies that wherever the circle $C$ is, there will be points in a neighborhood of $-i$ that are mapped to points outside the circle $C$. But $|z| < 3$ for at least some of those points.
So it seems not to be a good assumption that the image of the points inside a circle will be inside the image of the circle. In this case, in fact, they are not.