Two methods.
Using CPhill's diagram,
E, H and D are collinear, (the line EHD is at rt-angles to the common tangent at E).
Let the radius of the small circle be c, then from the triangle GHD, c^2 + (1/2)^2 = HD^2,
so HD = sqrt(c^2 + 1/4),
so ED = HD + c = sqrt(c^2 + 1/4) + c = 1, (the radius of the big circle).
c^2 + 1/4 = (1 - c)^2 = 1 -2c + c^2,
2c = 3/4,
c = 3/8.
Let the radius of the small circle be c, then its Cartesian equation is
x^2 + (y - c)^2 = c^2
x^2 + y^2 -2yc = 0.................(1)
The equation of the big circle centre D is
(x - 1/2)^2 + y^2 = 1
x^2 - x + y^2 -3/4 = 0..................(2)
Solving simultaneously, (subtract (1) - (2)),
x - 2yc + 3/4 = 0.
Substitute for x in (1),
(2yc - 3/4)^2 + y^2 - 2yc = 0,
4y^2c^2 - 3yc + 9/16 + y^2 - 2yc = 0,
y^2(4c^2 + 1) - 5yc + 9/16 = 0.
For tangency, the equation needs to have a single root, so
25c^2 - 4(4c^2 +1)(9/16) = 0,
16c^2 - 9/4 = 0,
c^2 = 9/64,
c = 3/8.