The shaded area is a right triangle whose altitude is 1. To find the length of the base, we may use a Cartesian coordinate system where the origin is at the lower left vertex of the square and find the line along which the hypotenuse lies and use its slope to find the base. This line passes through the point (1,1), and letting its slope be $m$, the point-slope formula allows us to express it as:
$$y-1=m(x-1)$$
(1) $$y=mx+1-m$$
Suppose we wish to generalize a bit and let the radius of the circle be $$0<r<\frac{1}{2}$$.
Next, to determine $m$, we may use the formula for the distance between a point and a line. A derivation of this formula is given here:
http://mathhelpboards.com/math-notes-49/finding-distance-between-point-line-2952.html
The point, the center of the circle, is $(r,r)$, and the line is given in (1), and so we may state:
$$r=\frac{|mr+1-m-r|}{\sqrt{m^2+1}}$$
$$r\sqrt{m^2+1}=|(m-1)(r-1)|$$
Squaring both sides, we obtain after simplification:
$$(1-2r)m^2-2(r-1)^2m+(1-2r)=0$$
Applying the quadratic formula, we find:
$$m=\frac{(r-1)^2\pm r\sqrt{r^2-4r+2}}{1-2r}$$
Observing that we want the greater of the two roots as the smaller root represents the tangent line that passes over the circle, we are left with:
$$m=\frac{(r-1)^2+r\sqrt{r^2-4r+2}}{1-2r}$$
Now, to find the base $b$ of the triangular area, we may write:
$$m=\frac{(r-1)^2+r\sqrt{r^2-4r+2}}{1-2r}=\frac{1}{b}\implies b=\frac{(r-1)^2-r\sqrt{r^2-4r+2}}{1-2r}$$
Hence, we find the shaded area $A$ to be:
$$A(r)=\frac{1}{2}bh=\frac{1}{2}\left(\frac{(r-1)^2-r\sqrt{r^2-4r+2}}{1-2r} \right)(1)=\frac{(r-1)^2-r\sqrt{r^2-4r+2}}{2(1-2r)}$$
Now, for the given problem, we have $$r=\frac{1}{4}$$, and so the value of $A$ for this particular value of $r$ is:
$$A\left(\frac{1}{4} \right)=\frac{\left(\frac{1}{4}-1 \right)^2-\frac{1}{4}\sqrt{\left(\frac{1}{4} \right)^2-4\left(\frac{1}{4} \right)+2}}{2\left(1-2\left(\frac{1}{4} \right) \right)}=\frac{9-\sqrt{17}}{16}$$