Step 1: See the two curves.
We need the area between the parabola $y^2=4x$ and the line $y=x$.
Step 2: Find where they meet, in $y$.
From the parabola $x=\frac{y^2}{4}$, and from the line $x=y$. Setting equal: $\frac{y^2}{4}=y$, so $y^2=4y$, giving $y=0$ and $y=4$.
Step 3: Choose to integrate along $y$.
For each $y$ from $0$ to $4$, the line $x=y$ is on the right and the parabola $x=\frac{y^2}{4}$ is on the left. So width $=y-\frac{y^2}{4}$.
Step 4: Set up the integral.
Area $=\displaystyle\int_0^4\left(y-\frac{y^2}{4}\right)dy$.
Step 5: Integrate.
$=\left[\dfrac{y^2}{2}-\dfrac{y^3}{12}\right]_0^4=\dfrac{16}{2}-\dfrac{64}{12}=8-\dfrac{16}{3}$.
Step 6: Final value.
$8-\dfrac{16}{3}=\dfrac{24-16}{3}=\dfrac{8}{3}$ sq. units, which is option (1). \[ \boxed{\text{Area}=\frac{8}{3}\text{ sq. units}} \]