The step you don't understand is hidden in some of the details associated with 2 applications of the Chain Rule.
$\frac {d}{dx} \left( \frac {dy}{dx} \right) = \frac {d}{dx} (1-y^2)^{1/2}$ (Eq01)
$\frac {d^2y}{dx^2} = \frac {d}{dx} (1-y^2)^{1/2}$
Now, let $\mu=(1-y^2)$ (Eq02)
We now have $\frac {d^2y}{dx^2} = \frac {d}{dx} \mu^{1/2}$ (Eq03)
We now have a mis-match of the Derivative Operator (x), and the function ($\mu$). The Chain Rule essentially says you can change the x to $\mu$ ONLY IF you multiply by d$\mu$/dx. So Eq03 becomes
$\frac {d^2y}{dx^2} = \left(\frac {d}{d\mu} \mu^{1/2}\right)\cdot\left(\frac {d\mu}{dx}\right)$ (Eq04)
The first parenthesis on the RHS of Eq04 is straightforward derivative of a monomial
$\left(\frac {d}{d\mu} \mu^{1/2}\right)=\frac {1}{2}\mu^{\frac {1}{2}-1}=\frac {1}{2\mu^{1/2}}$ (Eq04a)
The second parenthesis on the RHS of Eq04 is determined by applying the Derivative Operator to Eq02, the variable substitution.
$\frac {d}{dx}\mu=\frac {d}{dx}(1-y^2)\Rightarrow \frac {d\mu}{dx}=\frac {d}{dx}(1)-\frac {d}{dx}y^2\Rightarrow\frac {d\mu}{dx}=0-\frac {d}{dx}y^2$
Now, here again, we have a mis-match and must use the Chain Rule again.
$\frac {d\mu}{dx}=-\frac {d}{dx}y^2=-\frac {d}{dy}y^2\frac {dy}{dx}=-2y\frac {dy}{dx}$ Therefore,
$\frac {d\mu}{dx}=-2y\frac {dy}{dx}$ (Eq04b)
Substituting (Eq04a) and (Eq04b) into (Eq04):
$\frac {d^2y}{dx^2} = \left(\frac {1}{2\mu^{1/2}}\right)\cdot\left(-2y\frac {dy}{dx}\right)=\frac {-2y\frac {dy}{dx}}{2\mu^{1/2}}=\frac {-2y\frac {dy}{dx}}{2(1-y^2)^{1/2}}$
$\frac {d^2y}{dx^2} = \frac {-y\frac {dy}{dx}}{(1-y^2)^{1/2}}$