The question was to find the equation of the family of circles which touches the pair of lines, $x^2-y^2+2y-1 = 0$
So I tried as follows:-
The pair of lines is, by factoring the given equation, $x^2-y^2+2y-1 = 0$ is $x+y-1=0$, and $x-y+1=0$. These are tangent to the required circle, so the center of the circle, (let that be $(h,k)$) must lie upon the angle bisector of these two lines.
Also, the distance of the center $(h,k)$ from these two lines must equal to the radius (assuming it to be $r$).
How do I use these to get the required equation?

Let $(u, v)$ is a center of a circle.
Since both lines $x+y-1 = 0$ and $x-y+1 = 0$ are the tangent line, the distance from $(u, v)$ to these lines must be the same.
By using the formula of the distance from a point to a line, we have the following equation:
$$ r = \frac{|u-v+1|}{\sqrt{2}} = \frac{|u+v-1|}{\sqrt{2}} \Leftrightarrow |u-v+1| = |u+v-1|. $$
Here, $r$ is the radius of a correponding circle.
There are four possible scenarios:
Scenario 1.
$$ \left\{ \begin{aligned} u-v+1 &> 0 \\ u+v-1 &> 0 \\ u-v+1 &= u+v-1 \end{aligned} \right. \Leftrightarrow (u > 0, v = 1) $$
The radius of such a circle equals to $$ r = \frac{|u|}{\sqrt{2}}, $$
and the corresponding family of circles is:
$$ (x-u)^2 + (y-1)^2 = \frac{u^2}{2}, \text{ }u > 0. $$
Scenario 2.
$$ \left\{ \begin{aligned} u-v+1 &< 0 \\ u+v-1 &> 0 \\ -(u-v+1) &= u+v-1 \end{aligned} \right. \Leftrightarrow (u = 0, v > 1) $$
The radius of such a circle equals to $$ r = \frac{|v-1|}{\sqrt{2}}, $$
and the corresponding family of circles is:
$$ x^2 + (y-v)^2 = \frac{(v-1)^2}{2}, \text{ }v > 1. $$
Scenarios 3 and 4 I left to you.
Scenario 3.
$$ \left\{ \begin{aligned} u-v+1 &> 0 \\ u+v-1 &< 0 \\ u-v+1 &= -(u+v-1) \end{aligned} \right. $$
Scenario 4.
$$ \left\{ \begin{aligned} u-v+1 &< 0 \\ u+v-1 &< 0 \\ -(u-v+1) &= -(u+v-1) \end{aligned} \right. $$