Answer 1. You are looking for a complexity. You must decide what case complexity you want: best, worst, or average. Depending on what you pick, you find T(1) in different ways:
- Best: Think of the easiest input of length 1 that your algorithm could get. If you're searching for an element in a list, the best case is that the element is the first thing in the list, and you can have T(1) = 1.
- Worst: Think of the hardest input of length 1 that your algorithm could get. Maybe your linear search algorithm executes 1 instruction for most inputs of length 1, but for the list [77], you take 100 steps (this example is a bit contrived, but it's entirely possible for an algorithm to take more or less steps depending on properties of the input unrelated to the input's "size"). In this case, your T(1) = 100.
- Average: Think of all the inputs of length 1 that your algorithm could get. Assign probabilities to these inputs. Then, calculate the average T(1) of all possibilities to get the average-case T(1).
In your case, for inputs of length 1, you always return, so your T(n) = O(1) (the actual number depends on how you count instructions).
Answer 2. The "1" in this context indicates a precise number of instructions, in some system of instruction counting. It is distinguished from O(1) in that O(1) could mean any number (or numbers) that do not depend on (change according to, trend with, etc.) the input. Your equation says "The time it takes to evaluate the function on an input of size n is equal to the time it takes to evaluate the function on an input of size n - 1, plus exactly one additional instruction".