Like pretty much anything Lincoln did, issuing the Emancipation Proclamation (EP for clarity hereafter) was a calculated move that served several purposes all at once. The EP was simultaneously influenced by personal, political, and military concerns that Lincoln had, yet the positive impact that it eventually had was not a foregone conclusion when the president announced it. More on that in a second, though…

Lincoln’s personal views regarding slavery went back to his youth and young adulthood. Lincoln’s close friend, Joshua Speed, wrote about a conversation he’d had with Lincoln when the future president visited Speed in Kentucky in 1841. Lincoln remarked that his time on the Mississippi River, seeing slaves in bondage, had had an immense impact on him. Having seen slavery in-person, having witnessed it first-hand, really stuck with Lincoln. Although the political realities of the day didn’t allow him to take a hardline abolitionist stance in the 1840s and 50s, he always seemed to harbor a nagging hatred for the institution. Having secured the presidency in 1860 with promises not to interfere with slavery in the states where it already existed, Lincoln knew that he needed a damn good reason to go after the institution directly lest he lose the support of the Blair and border state republicans. I only bring this up to establish that while Lincoln expressed a personal hatred of slavery, as a political animal, the man wasn’t going to attack it head-on without all his ducks in a row.

The military situation of the Civil War changed things, and gave him the footing he needed to attack the institution of slavery, however. In both the east and west, Lincoln’s generals were complaining about escaped slaves that came into their lines that had to then be returned to their southern (Confederate) owners. In 1861 and early 1862, army commanders were expected to return these escaped slaves to their masters, which they rightfully complained about not just for moral reasons, but for practical ones as well. These slaves were used to prop up the Confederate war effort in any number of ways, whether it was by producing materiel and crops, or by digging fortifications or acting as teamsters for Confederate forces. Union general Benjamin Butler famously refused to return slaves that entered his lines early in the war, claiming that they were “contraband of war.” He was effectively saying that these slaves were valuable war resources that shouldn’t have been returned to the enemy, and while Lincoln quietly disciplined Butler for taking unilateral action in this way, by mid-1862, Lincoln was starting to see that he had an opening with this logic.

Thus, the EP was born out of a military necessity that demanded that the Confederacy’s slaves not only NOT be returned, but to give slaves an incentive to flee, further robbing the Confederacy of their free workforce. Politically, it was dicey in the domestic sense, as loyal Unionists that didn’t necessarily support emancipation were put in a situation where they had to make a decision about whether they wanted to remain Unionists and fight for the abolitionist cause. Internationally, it was a master stroke, as Britain and France, somewhat on the fence about recognizing the Confederacy in 1862, were far less likely to do so after the EP was issued.

So, to recap, Lincoln had a well-documented aversion to slavery since young adulthood, but needed the political climate to be just right for him to make a decisive move on the matter as president. The military situation as the war progressed into 1862 offered him the opportunity to kill two birds with one stone (to attack the institution of slavery, which he viewed as evil, while simultaneously aiding the Union war effort). There was a risk that Lincoln would lose the support of the border states, and Union democrats with the EP, however, and while Copperheads like Clement Vallandigham did go after Lincoln as a result, it never materialized into anything that seriously threatened the stability of the Union or Lincoln’s support amongst republicans.

[Sources: Ronald C. White, ‘American Ulysses’; Doris Kearns Goodwin, ‘Team of Rivals’; Bruce Catton, ‘Glory Road’; James McPherson, ‘Battle Cry of Freedom’]

Regarding your second question:

The South knew that they could not match the industrial output of the North, but they believed that they would not have to. Their strategy was to survive long enough, and inflict enough losses and/or destruction on the North, that political opinion would shift against the war and Lincoln would send his armies home. In the words of Confederate President Davis, "All we ask is to be left alone." They also hoped for international intervention or at least recognition. The French had supported America against the British in the Revolution, and the South hoped for similar support in what they saw as a second Revolution.

As part of this "leave us alone" policy, their early war strategy (1861-1862) took the form of defensive holding actions, allowing them to spin the North as an invader. A year into the war, when this seemed to be both politically ineffective and militarily unwise, they turned to an offensive strategy. They hoped that defeating Northern armies on their own soil would demoralize Unionists and embolden secessionists among the border states, pushing them towards joining the Confederacy. The border state of Maryland surrounds Washington DC, and Kentucky was strategically located to slice the North in two ("the dagger at the armpit of the Union"). If either one joined the Confederacy, continuing the war would have been untenable for the North. Additionally, they hoped that such a victory would help to legitimize the South on the international stage, encouraging a foreign power to intervene.

All of the South's attempts at invading Northern territory failed, however. Their 1862 offensive in Kentucky stalled when it became clear that Kentuckians were not going to rise up in revolt alongside them. At the same time, their invasion into Maryland was stopped at the Battle of Antietam. These two Union strategic victories gave Lincoln the political capital he needed to proclaim the Emancipation Proclamation. As /u/petite-acorn noted, this all but closed the door on international support for the South. Britain would not support a nation fighting for slavery, and France was unable to act without Britain's approval.

One final invasion into Northern territory, a year later in mid-1863, was decisively defeated at the Battle of Gettysburg. From then on, the South was steadily pushed back. International support evaporated, and hope of the border states joining them faded. The South's last hope was to survive long enough, and bleed the Union armies so thoroughly, that Lincoln would be defeated in the 1864 presidential election. This was not to be, as the Democrats bungled their campaign, and the capture of Atlanta in September buoyed Lincoln's popularity. Lincoln was re-elected in a landslide, and afterwards the South never really had any semblance of overall war goals. They kept fighting for another 5-8 months, but by then they knew it was hopeless.

Source: Shelby Foote, The Civil War: a Narrative