1) Is that definition of stability general? When I studied control theory, I saw a different definition of stability, that is: stable system = system in which bounded input implies bounded output. I do not see any link between this definition and an oscillating behavior.
The connection is very easy to see. Just write the complete transfer function in terms of the open-loop gain.
$$H(s) = \frac{Y(s)}{X(s)} = \frac{A(s)}{1+A(s)\beta}.$$
Clearly, if loop gain \$L(s) = A(s)\beta = -1\$, then the output is not bounded. It is only possible if \$|L(s)| = 1\$ and \$\angle L(s) = 180^\circ\$. For second order systems, such a phase lag is not possible as you know.
2) Now consider again the analysis of the two poles amplifier shown above. The book says that the amplifier is always stable because all the poles of the closed loop system have negative real part. It is true, but they may have also an imaginary part, which means oscillation. It is in contrast with its definition of stability.
Consider a second order system with following transfer function:
$$H(s) = \frac{1}{(s-p_1)(s-p_2)}$$
The corresponding time domain response (natural response) will be given by:
$$h(t) = A_1e^{p_1t} + A_2e^{p_2t}$$
Here, \$A_1\$ and \$A_2\$ are constants.
If \$p_{1,2} = \alpha \pm j\omega\$, then, the response becomes:
$$h(t) = A_1e^{\alpha t}e^{j\omega t} + A_2e^{\alpha t}e^{j\omega t}$$
Thus, if the poles lie in the left half of s-plane meaning \$\alpha < 0\$, the response decays over time resulting in decaying oscillations. Thus, depending on the damping \$\alpha\$, the system stops oscillating after some time.
If the poles lie in the right half of s-plane meaning \$\alpha > 0\$, the response grows over time resulting in increased oscillations.
If the poles lie in the right half of s-plane meaning \$\alpha = 0\$, the response is a constant sinusoidal output and the oscillations are sustained over time. This is where the system behaves as oscillator.
EDIT
For oscillation to happen the Barkhausen's Criteria needs to be satisfied. In the figure below (assume the disturbance is zero), if you travel around the loop you will have a gain of \$-A\beta = -L(s) = 1\$. Another inversion is added due to the difference operation at the input. Thus we have a phase difference of \$360^\circ\$ around the loop and the magnitude of gain is unity. This is the condition for sustained oscillation.
