First, it is confusing to me that you are using both Z and z. Are they the same thing?
I can't speak for WHY they are doing this but how they do the first line is evident: Divide both numerator and denominator of the second term by "z". In the numerator you get z/z= 1, in the denominator the "z" becomes "z2" inside the square root: [itex]\sqrt{R^2/z^2+ z^2/z^2}= \sqrt{1+ (R/z)^2}[/itex]. That is NOT exactly equal to the last line. The last line is an approximation. Yes, you could think of it as a 2nd[/b] degree Taylor polynomial approximation. You could also think of it as a special case of the binomial theorem- extended to fractional powers. Just as (1+ x)n= 1+ nx to first degree, [itex](1+ (R/z)^2)^(-1/2)[/itex] is [itex]1+ (-1/2)(R/z)[/itex]. Of course, now the "1" and "-1" will cancel. To second degree, 1- z/(R2+ z2)-1/2= (1/2)(R/z)2. I assume the next step will involve a limit as R goes to 0 or z goes to infinity or at least that (R/z) is small to make the approximation as accurate as possible.