This happens because method_1 gets its own local scope where it can declare variables. Python sees value = True and thinks you're creating a new variable named value, local to method_1.
The reason Python does this is to avoid polluting the outer scope's locals with variables from an inner function. (You wouldn't want assignments in regular, module-level functions to result in global variables being created!)
If you don't assign to value, then Python searches the outer scopes looking for the variable (so reading the variable works as expected, as demonstrated by your method_2).
One way to get around this is by using a mutable object instead of assigment:
result = { 'value': False }
def method_1():
result['value'] = True
In Python 3, the nonlocal statement (see also docs) was added for exactly this scenario:
def method_1():
nonlocal value
value = True # Works as expected -- assigns to `value` from outer scope