Yes, this is the equation of a tangent, but don't forget what you need to solve. You are interested in the area of the triangle formed by the x- and y-axes and the tangent. The triangle is right-angled, so to find the area, you need to know the sides adjacent to the right angle (also called legs, or catheti). To find the sides, we find the intercept of the tangent, i.e., where the tangent crosses the axes. Let's call the point of tangency $(a,b)$ instead of $(x_0,y_0)$. Substituting $x=0$ into the equation of the tangent
\[
ax+by=1
\]
gives $y=1/b$; similarly, substituting $y=0$ gives $x=1/a$. Thus, twice the area of the triangle is $1/(ab)$. This is the expression we need to minimize subject to the restriction that the point of tangency lies on the circle, i.e., $a^2+b^2=1$. Minimizing $1/(ab)$ is equivalent to maximizing $ab$ or $a^2b^2$ if $a>0$ and $b>0$. Thus, we need to maximize $a^2(1-a^2)$. Denoting $a^2=t$ (note that $a^2$ varies between 0 and 1), we need to maximize $t(1-t)$ on $[0,1]$. The point of maximum is $t=1/2$, from where $a=\sqrt{1/2}$ and $b=\sqrt{1/2}$.