The equation of a circle centered at \( (h, 0) \) with radius \( h \) is \( (x - h)^2 + y^2 = h^2 \).
Expanding this equation yields \( x^2 + y^2 + h^2 - 2hx = h^2 \), which simplifies to \( x^2 + y^2 - 2hx = 0 \).
Differentiating implicitly with respect to \( x \), we get \( 2x + 2y \frac{dy}{dx} - 2h = 0 \).
This can be rearranged to express \( h \) as \( h = x + y \frac{dy}{dx} \).
Substituting this expression for \( h \) back into the simplified equation \( x^2 + y^2 - 2hx = 0 \) gives \( x^2 + y^2 - 2x \left( x + y \frac{dy}{dx} \right) = 0 \).
Further expansion results in \( x^2 + y^2 - 2x^2 - 2xy \frac{dy}{dx} = 0 \), which simplifies to \( y^2 - x^2 - 2xy \frac{dy}{dx} = 0 \).
Rearranging to find the equation of the family of circles, we obtain \( 2xy \frac{dy}{dx} = y^2 - x^2 \).