A result for differentiable maps that I'll use: let $F:M\to N$, where $M,N$ are smooth manifolds and $F$ is a smooth map. If $(U,x)$ is a chart around $p\in M$ and $(V,y)$ is a chart around $F(p)\in N$, then $$d_p(F)\bigg(\frac{\partial}{\partial x^j}\bigg|_p\bigg)=\bigg(\frac{\partial}{\partial x^j}\bigg|_p\bigg)(y^i\circ F)\frac{\partial}{\partial y^i}\bigg|_{F(p)}\equiv\frac{\partial(y^i\circ F)}{\partial x^j}(p)\frac{\partial}{\partial y^i}\bigg|_{F(p)}$$
Now let $\lambda:(a,b)\to M$ be some curve from interval $(a,b)$ to $M$. $(a,b)$ itself can be taken to be a 1D smooth manifold. So I can use the result above like so: $$d_{t_0}(\lambda)\bigg(\frac{d}{dt}\bigg|_{t_0}\bigg)=\bigg(\frac{d}{dt}\bigg|_{t_0}\bigg)(x^i\circ \lambda)\frac{\partial}{\partial x^i}\bigg|_{\lambda(t_0)}\equiv\frac{d(x^i\circ \lambda)}{dt}(t_0)\frac{\partial}{\partial x^i}\bigg|_{\lambda(t_0)}$$
But a book I'm reading calls the expression on the right as $\frac{d\lambda}{dt}(t_0)$. What's the reasoning for getting from the RHS of the above equation to $\frac{d\lambda}{dt}(t_0)$?
I don't think one can provide a purely mathematical answer, in as much it is a notational convention. Curves, and their derivatives, play an important role in differential geometry and you want to get a shorthand for what you write above (the tangent map of $\lambda$ acting on $d/dt$).
I don't know what book you are using, but for instance you will find this remark in TU's book, page 92:
By the way, TU defines $c'(t_0)=c_*(d/dt|_{t_0})$, and he mentions explicitely that an alternative notation is $(dc/dt)(t_0)$ (which would agree with your book's notation).