Explanation of Libido in anime
In simple terms, libido is another word used to describe life force, or orgone energy. You can think of it like mana.


  Orgone energy is a hypothetical universal life force originally proposed in the 1930s by Wilhelm Reich. -source


To answer your second question (paraphrasing from the source article):
Libido generates orgone energy, so: 

No libido -> no orgone energy -> no life.