Suppose we have two circles $S_1$ and $S_2$.
Why is the circle through the point of intersection of the two circles given by:
$S_1 + \lambda(S_2 - S_1) = 0$
and not:
$S_2 + \lambda(S_1) = 0$?
These two questions along with their solutions are the source of my confusion:
Question 1)
It can be clearly seen that in the first question then have used $S_1 + \lambda (S_2) = 0$
And in the next one $S_1 + \lambda (S_1 - S_2) = 0$
So I am unable to understand when to use which form.


Because the coefficients of each circle need to add up to 1 to make it a convex combination -- in the proposed example, they are $1-\lambda$ and $\lambda$ (for $S_1$ and $S_2$, respectively). Having a convex combination ensures that if $p \in S_1 \cap S_2$ then $p$ will also be in the resulting figure.
In your suggestion, they are $\lambda$ and $1$...