I don't know Fraleigh's book, and I'm not near a library that has a copy right now so I can't check out his approach to elementary group theory, what he says, etc., but it looks like he wants to use "left cancellation", the property that $ab = ac$ implies $b = c$, to prove the only idempotent in a group is the identity element. Left (and also right) cancellation of course hold in any group by virtue of the existence of inverses. But is also possible to have cancellation in an algebraic structure without identity, for example the set $n \Bbb Z$ for integer $n > 1$, considering it equipped with only multiplication. So perhaps Fraleigh is trying to show how this argument fits into a more general pattern. Of course, if $G$ is finite and has an identity, then cancellation implies the existence of inverses, since in that case the map $g \to ag$ is injective, whence finiteness forces it to be surjective as well, so there must be some $b \in G$ with $ab = e$. Then we could argue that $x^2 = x$ forces $x =e$, as shown by AWertheim in his answer, by simply multiplying by $x^{-1}$: $x = x^{-1}x^2 = x^{-1}x = e$. In any event, if one wants to proceed via cancellation, the equation $x = xe$ is needed so that something is "left over" after one cancels out $x$! It's not so much
prognostication as it is experience with such
maneuvers. But it can
seem a bit mysterious the first time you see it.
These things being said, it seems easier, clearer and cleaner to me to simply write
$x^2 = x \Rightarrow x^{-1}x^2 = x^{-1}x = e \Rightarrow x =e. \tag{1}$
Hope this helps! Merry Christmas to One and All,
and as always,
Fiat Lux!!!