First of all, you need to be more accurate when talking about such things. There is no definition for a "continuous" space. If I understand correctly, you are confused with the notion of discreteness, e.g. the space being a finite set. My advice would be this: before trying to get intuition in the game, stick to the definitions and strict mathematical proofs.
Your current problem is easily tackled: let $E=\{y\in M: r<d(x,y)<s\}$. Take $y\in E$ and set $t=\min\{d(x,y)-r, s-d(x,y)\}>0$; consider the open ball $B(y,t)$, your task is to show that $B(y,t)\subset E$. Indeed, if $z\in B(y,t)$, then $d(x,z)\leq d(x,y)+d(y,z)<t+d(x,y)\leq s-d(x,y)+d(x,y)=s$ and $d(x,z)\geq d(x,y)-d(y,z)\geq d(x,y) - (d(x,y)-r)=r$, hence $z\in E$.
How did we find this radius $t$? We used our geometric intuition from $\mathbb{R}^2$; as you can see, it worked. In time you will understand when things from euclidean spaces cannot be generalized to arbitrary metric spaces but it always seemed like a good start to me.
Edit: In order to see what I mean by my advice, look at this example: suppose that our space is $X=\{1,2\}$ and our metric is $d_0$, with $d_0(x,y)=1$ if $x\neq y$ and $d_0(x,y)=0$ if $x=y$. This space is as "discontinuous" (to use your words) as it gets. But none of these affect the proof above: for example, for $x=1$, $r=0.5$ and $s=3$, our set $E$ is $\{2\}$. So what? $\{2\}$ is open in this topology! (verify it using definitions, it is easy)