Below there is an excerpt of an algorithm to compute square roots. I present it as I found.
Step 1: Group the number in "twos" from the decimal place. (If you have a number with an odd number of digits, the group to the far left will only be a group of 1 digit.)
Step 2: Start with the first group of two (the group on the left). This group may be a group of only one number if your number has an odd number of digits. Find the greatest square less than or equal to that group of digits and its square root will be your first approximation of the entire square root.
Step 3: Subtract the current approximation squared and bring down the next group of numbers behind it. This is your next number to work with.
Step 4: Double the current approximation of the root.
Step 5: Find the "ones" digit of the doubled number that would result in a number which divides into the number you are currently working with- with the smallest possible remainder. This is the next number in your approximation of the square root.
Step 6: Multiply the "ones" digit by the doubled number plus the "ones" digit. Subtract this number from the number you are currently working with and bring down the next group of numbers behind it. This is your next group of numbers to work with.
Step 7: Repeat steps 4 through 6 until you get an approximation with an acceptable number of significant digits.
I understand everything but Step 5. In the picture above, for instance, how do they get that $6$ in order to form $26$?
I had understood we should find the digit $\bullet$ in $2\bullet$ such that $154/2\bullet$ would produce the least remainder. But if that were the case, one should have $\bullet=9$ since $154/29$ has remainder $0$.
Furtheremore, what if there were more than one digit $\bullet$ which lead to the same remainder? Which would I pick?
Thanks.

In step $5$ you are going to multiply the digit $d$ you put on top by $20+d$ because you write $d$ to the right of the $2$ and multiply. To get a positive remainder you need $d(20+d) \le 174$. Here if $d=6, d(20+d)=156$, while if $d=7, d(20+d)=189,$ which is too large.
The idea of the algorithm is based on $(a+b)^2=a^2+2ab+b^2$. $a$ represents the digits you have already found, and you have subtracted $a^2$ from the number you are taking the square root of already. In your example, the first $a$ is $100$ and we subtracted $100^2$ in step $3$. Writing twice the current set of digits (here $2$) is the $2a$ part of $2ab+b^2$. When you write the next digit in both places and multiply, you get $2ab+b^2$. When you subtract that you have subtracted $a^2+2ab+b^2$ from the original number, here leaving $27493-25600=1893$. Our new $a$ is $160$ and we need to find $b$ such that $2ab+b^2 \lt 1893$, which turns out to be $5$.