Why is only the first prerequisite executed?

Your Makefile says the following:

• all targets are phony (i.e. they don’t correspond to on-disk artifacts);
• all depends on target1 and target2, and since it’s the first target, is the default target;
• target1 sets NUM to 1 (using target-specific variable assignments);
• target2 sets NUM to 2;
• target1 and target2 both depend on target;
• target must be satisfied by running the given echo command.

Running make with these definitions will result in the following:

• all isn’t satisfied, since it’s phony, and needs target1 and target2;
• target1 isn’t satisfied, since it’s phony, and needs target (with NUM set to 1);
• target isn’t satisfied, since it’s phony, and has no prerequisites, so make runs the echo command;
• target2 isn’t satisfied, since it’s phony, but target is satisfied, since it’s been processed already, so nothing happens.

You can’t use targets as functions, as you’re trying to do here; some Make implementations do support functions, but you don’t need that:

target1 target2: @echo "this is target ${NUM}"