Let $C$ be a circle and $M$ any point inside the circle. Consider a moving chord $AB$ of the circle which stuntedness a right angle at $M$. Let $O$ be the midpoint of this chord and let $H$ be the altitude from $M$ on $AB$ so that the angle of $BHM=90$degrees.
If we consider $M$ as a degenerate circle of radius zero, show that $O$ traces out a circle in the pencil defined by $C$ and $M$ as the chord $AB$ moves around the circle. Furthermore, show that $H$ lies on the same circle.
So I've already shown that $P_c(O)=-P_m(O)$. I can somewhat see that $O$ traces out a circle inside of $C$ with the point $M$ in the circle, but i don't really know how to explicitly show that $O$ traces out the circle using this power property. The answer below are very insightful but not exactly what i'm looking for.
I just learnt pencils of circles and i'm having a tough time really understanding it and how it applies. Especially how to show that it traces out a circle in the pencil.
Note: I add an illustration here:



Let extend the original picture to get the following
Here, $G$, $E$, and $F$ are midpoints of $BC$, $CD$, and $DA$ respectively.
Then $GE$ and $OF$ are both parallel to and equal to $\frac12BD$, $EF$ and $OG$ are both parallel to and equal to $\frac12AC$. Since $AC\perp BD$, $OGEF$ is a rectangle.
Since $OGEF$ is a rectangle, $OE$ and $GF$ are equal and intersect at their common midpoint $N$.
Next, since $\angle CME=\angle MCE=\angle MBH$, we have $$\begin{aligned}\angle HMB+\angle BMC+\angle CME &= \angle HMB+90^\circ + \angle MCE\\ &=\angle HMB+90^\circ + \angle MBH\\ &=180^\circ. \end{aligned}$$ Thus, $M$, $E$, and $H$ are colinear. In particular, $ME\parallel IO$, where $I$ is the center of the circle $c$.
On the other hand, the two small arc $CD$ and $AB$ add up to $180^\circ$, so $$CD^2+AB^2 = 4R^2,$$ where $R$ is the radius of $c$. Since $ME =\frac12 CD$, we have $CD = IO$. Thus $OMEI$ is a parallelogram, and so $N$ is the midpoint of $MI$.
Now, look at $\triangle MOI$, we have $$MO^2+OI^2=R^2.$$ So $NO$ is constant by the median length formula.
Lastly, we already showed that $E$, $M$, and $H$ are colinear, so $EH\perp HO$. Thus $H$ belongs to the circle with center $N$ and radius $NO$.