Since you’ve already introduced homogeneous coordinates, this transition can be demonstrated by borrowing some tools from projective geometry.
Consider the one-parameter family of homographies of the plane that fix $(-1,0)$, $(0,1)$ and $(0,-1)$ and map $(1,0)$ to the point with homogeneous coordinates $1:0:\mu$, i.e., to $(1/\mu,0)$ when $\mu\ne0$. In matrix form, this is $$H(\mu) = \begin{bmatrix}1&0&0 \\ 0&\frac{\mu+1}2&0 \\ \frac{\mu-1}2&0&\frac{\mu+1}2\end{bmatrix}.$$ For $\mu\ne-1$, these homographies map the unit circle to the conic $$H^{-T} \operatorname{diag}(1,1,-1) H^{-1} = \begin{bmatrix} {4\mu\over(\mu+1)^2} & 0 & {2(\mu-1)\over(\mu+1)^2} \\ 0 & {4\over(\mu+1)^2} & 0 \\ {2(\mu-1)\over(\mu+1)^2} & 0 & -{4\over(\mu+1)^2}\end{bmatrix},$$ which we can rescale to $$C(\mu) = \begin{bmatrix} \mu & 0 & \frac12(\mu-1) \\ 0&1&0 \\ \frac12(\mu-1)&0&-1\end{bmatrix},$$ i.e., $\mu x^2+y^2+(\mu-1)x=1$.
As $\mu\to0^+$, we get ever-wider ellipses. Informally, we’re stretching the right side of the unit circle farther and farther “toward infinity.” At $\mu=0$, the point $1:0:1$ gets mapped to $1:0:0$—the circle has been “stretched to infinity”—and the resulting conic is the parabola $y^2=x+1$. As $\mu$ becomes negative, the circle can be thought of as continuing to be stretched “beyond” the line at infinity, coming back around the other side, as it were, and the resulting conics are hyperbolas.
This also illustrates the general fact that all nondegenerate conics are projectively equivalent: we’ve generated ellipses, a parabola, and hyperbolas by applying various projective transformations to the unit circle. What determines the type of conic is the number of real intersections with the line at infinity: none, one and two, respectively. However, from a projective-geometric point of view, there’s nothing special about the line at infinity—any line can be chosen for this—so there’s only one type of nondegenerate conic. (For that matter, being able to identify a conic as the unit circle requires some further choices that impose a Euclidean geometry on the projective plane. These choices are implicit in the coordinate system that I’ve used.)
Incidentally, there’s sort of a removable discontinuity at $\mu=-1$. $H(-1)$ is not invertible, so can’t be used directly to construct a conic from the unit circle, but $C(-1)$ is perfectly sensible. To either side of this value the conics are hyperbolas and the vertices of these hyperbolas get closer and closer together as $\mu\to-1$. At $\mu=-1$, the vertices meet: the conic becomes the degenerate hyperbola (pair of lines) $(x+y+1)(x-y+1)=0$.