They never stated y^2 = x + 1 was a function.

I don't really like how they phrased the question though. An equation isn't a function. A graph isn't a function.
y = x isn't a function. It's a straight line equation. x is a function though; it's the identity function f(x) = x.
y = x^2 isn't a function. x^2 is a function though. And y is a function of x. The equation itself, y = x^2, is a relation.
A function of x doesn't have anything to do with y, if you think about its definition. It has a domain, and it has an image for each of the domain values. It's pretty much a one-dimensional object - it's only when you let y be equal to f(x) that it has a shape on the Cartesian plane.
Let's say we have a function with a domain D and we expressed the rule as f(x) = ...
What would happen if we replaced x with y? Nothing; if we let y = 1, then f(y) would be f(1), which would be the same as if we had f(x) and evaluated f(1). So basically we have the same function, if we replace x with y. Nothing about the inputs and outputs changed. We only changed the variable, but if you think about it the variable is only an intermediate object. It's basically a dummy variable. We changed x to y, but nothing about the function changed. We can replace it with u, v, or w, and it still doesn't matter. A function is separate from the variables themselves.
But now, let's let y = f(x). It now matters what the variables are, if we are considering the graph of the function on the Cartesian plane.
And now, swap x and y. We then have x = f(y). In other words, x is a function of y. Every value of y gives a unique value of x.
Let's define f. Say its domain is R, and its rule is f(y) = y^2 - 1. It doesn't have a shape yet, so let x = f(y) = y^2 - 1. Now it has a shape on the Cartesian plane; it's a parabola.
So, in the equation y^2 = x + 1, x is a function of y. When you take the inverse relation, y becomes a function of x.
It's complete to ask whether an equation is a function. If I asked whether y = x^2 was a function, I would have be more specific - I would have to say "is y a function of x?" In which case the answer would be yes. But if I didn't specify there, you could say "no, because x = √y or -√y so it's not a function of y."
Is x^2 + y^2 = 1 a function? Well, that's still an incomplete question. I should ask if y is a function of x, or if x is a function of y. The answer to both is of course no.
What's my point here... I guess we are too accustomed to graphing y as a function of x, which leads us to believe an equation only represents a function if y is a function of x.
y^2 = x + 1 still represents a function, you just have to be more specific. x is a function of y in this case. The function itself is f(u) = u^2 - 1, which does not have an inverse, so y is not a function of x.
When you swap x and y, you get the inverse relation. In that case, x is not a function of y, but y is now a function of x.