"Out" is being used here as a verb, meaning be made known; be disclosed or revealed. I've most often heard it used in the sentence "the truth will out".
(The second sentence, "In true life, of course, talent does not always out", appears to be incorrect. I'm not sure that you can use the verb "do" as an auxilliary with "out".)
By the way, I recommend this dictionary site:
OneLook Dictionary Search
It searches for definitions in several online dictionaries.