The hypothesis is being stealthily used in the assertion that $\overline{\varphi}$ is a homomorphism of rings.
Added and rewritten: More explicitly: the sketch Hungerford provides is to take an element of the polynomial ring $\sum r_{i}x_1^{k_{1i}}x_2^{k_{2i}}\cdots x_n^{k_{ni}}$ (suitably finite) and suggests mapping it to $\sum\varphi(r_i)s_1^{k_{1i}}\cdots x_n^{k_{ni}}.$ Then Hungerford asserts that this makes $\overline{\varphi}$ into a ring homomorphism.
You don't actually need the full hypothesis that $\varphi(1_R)=1_S$, but you do need something:
For $\varphi$ to be a ring homomorphism, we need $\varphi(1_R)$ to be an identity for $\varphi(R)$; for $\overline{\varphi}$ defined as above to be a ring homomorphism, we also need $\varphi(1_R)s_j = s_j$, because taking $p = 1_R$ and $q=x_j$ we have $\overline{\varphi}(pq) = \overline{\varphi}(x_j) =s_j$, and $\overline{\varphi}(p)\overline{\varphi}(q) = \varphi(1_R)s_j$. Thus, for $\overline{\varphi}$ to be a ring homomorphism, it is necessary that $\varphi(1_R)$ be an identity of the subring of $S$ generated by $\varphi(R)$ and $s_1,\ldots,s_n$ (as $R$ and $S$ are both commutative).
In fact, this is also sufficient for you to be able to get a homomorphism: you must require that $\varphi(1_R)$ be the identity for the subring of $S$ generated by $\varphi(R)$ and $s_1,\ldots,s_n$.
But it is not hard to check that the apparently weaker condition in the theorem (weaker, because it refers to a smaller class of homomorphisms and possible selections of $s_1,\ldots,s_n$) is in fact sufficient to characterize the polynomial ring up to unique isomorphism; the theorem suffices to prove the more general case by considering first the map onto S'=\langle \varphi(R),s_1,\ldots,s_n\rangle and then composing with the embedding S'\hookrightarrow S (since we are not requiring maps of rings with identity to send the identity to the identity).