In the early development of the calculus, mathematicians were interested in the effects of "small changes" in the domain ($x$ values) of a given function on the range of the given function (the values $f(x)$ which result)
A small change was called a differential, which we will write "$\text{d}x$". In some sense this can be thought of as the value $h$ you have above, and as $\text{d}x$ gets very small, or similarly $h$ gets very small, we understand it to "go to zero." This is the reason we ignore the terms with coefficients of orders of $h$ in your equation.
Here's an interesting example from history by Euler (adapted from Dunham 2008, "The Calculus Gallery," pp.53-54), which would not meet today's standard of proof, but might give some insight into what's going on:
Euler was interested in differentials of the sine function. He started with the power series of $\sin(x)$ and $\cos(x)$, thus
$$\sin x = x-x^3/3!+x^5/5!-\cdots$$ and $$\cos x = 1-x^2/2!+x^4/4!-\cdots.$$
He then substituted $\text{d}x$ into both (which he understood to be "infinitely small" - whatever that means!):
$$\sin(\text{d}x) = \text{d}x-(\text{d}x)^3/3!+\cdots$$ and $$\cos(\text{d}x)=1-(\text{d}x)^2/2!+\cdots.$$
The higher powers of $\text{d}x$ (such as $(\text{d}x)^2$ and $(\text{d}x)^3$ etc.) were considered insignificant (since they "are zero even more so than $\text{d}x$ or a constant" - again whatever that means!). Hence, we can write (*)
$$\sin(\text{d}x)=\text{d}x$$ and $$\cos(\text{d}x)=1.$$
Euler then considered the function $y=\sin(x)$, and using the idea of the differential considered:
$$y+\text{d}y = \sin(x+\text{d}x).$$
Using a trigonometric identity this gives
$$y+\text{d}y=\sin(x)\cos(\text{d}x)+\cos(x)\sin(\text{d}x),$$
which using (*) gives
$$y+\text{d}y = \sin(x)+\cos(x)\text{d}x.$$
Subtracting $y$ from both sides then gave
$$\text{d}y = \sin(x)+\cos(x)\text{d}x-y,$$
which simplifies to $$\text{d}y = \cos(x)\text{d}x.$$
In modern notation this tells us that $$\frac{\text{d}y}{\text{d}x} = \cos(x),$$
i.e. the derivative of $y=\sin(x)$ is $\cos(x)$ !