[proofplan]
We use the rational point $(-1,0)$ on the unit circle as a base point and intersect the circle with rational-slope lines through that point. First we verify directly that every displayed parametrized point lies on the circle. Then, given any rational point other than $(-1,0)$, we define the rational slope $t = Y/(X+1)$ of the line joining it to $(-1,0)$ and solve the resulting quadratic equation in $X$. The factor corresponding to the known intersection point $X=-1$ leaves the second intersection, which is exactly the displayed formula.
[/proofplan]
[step:Verify that the displayed rational functions give points on the unit circle]
Let $t \in \mathbb{Q}$. Since $1+t^2 \neq 0$, define rational numbers $X_t,Y_t \in \mathbb{Q}$ by
\begin{align*}
X_t &= \frac{1-t^2}{1+t^2}, &
Y_t &= \frac{2t}{1+t^2}.
\end{align*}
Then
\begin{align*}
X_t^2 + Y_t^2
&=
\left(\frac{1-t^2}{1+t^2}\right)^2
+
\left(\frac{2t}{1+t^2}\right)^2 \\
&=
\frac{(1-t^2)^2 + 4t^2}{(1+t^2)^2} \\
&=
\frac{1 - 2t^2 + t^4 + 4t^2}{(1+t^2)^2} \\
&=
\frac{1 + 2t^2 + t^4}{(1+t^2)^2} \\
&= 1.
\end{align*}
Thus every point in the displayed parametrized family is a rational point on $X^2+Y^2=1$. Also $(-1,0) \in \mathbb{Q}^2$ and
\begin{align*}
(-1)^2 + 0^2 = 1,
\end{align*}
so the listed points all lie on the rational unit circle.
[/step]
[step:Attach a rational slope to every rational point other than the base point]
Let $(X,Y) \in \mathbb{Q}^2$ satisfy $X^2+Y^2=1$, and assume $(X,Y) \neq (-1,0)$. Then $X \neq -1$: if $X=-1$, the equation gives
\begin{align*}
1 + Y^2 = 1,
\end{align*}
so $Y^2=0$ and hence $Y=0$, contradicting $(X,Y) \neq (-1,0)$.
Define
\begin{align*}
t := \frac{Y}{X+1}.
\end{align*}
Since $X,Y \in \mathbb{Q}$ and $X+1 \neq 0$, we have $t \in \mathbb{Q}$. By definition of $t$,
\begin{align*}
Y = t(X+1).
\end{align*}
[/step]
[step:Solve the circle-line intersection and discard the known base-point root]
Substituting $Y=t(X+1)$ into $X^2+Y^2=1$ gives
\begin{align*}
X^2 + t^2(X+1)^2 &= 1.
\end{align*}
Expanding and collecting powers of $X$,
\begin{align*}
(1+t^2)X^2 + 2t^2X + (t^2-1) &= 0.
\end{align*}
The left-hand side factors as
\begin{align*}
(1+t^2)X^2 + 2t^2X + (t^2-1)
&=
(X+1)\bigl((1+t^2)X + (t^2-1)\bigr).
\end{align*}
Since $X \neq -1$, the factor $X+1$ is nonzero. Therefore
\begin{align*}
(1+t^2)X + (t^2-1) &= 0.
\end{align*}
Because $1+t^2 \neq 0$, this gives
\begin{align*}
X = \frac{1-t^2}{1+t^2}.
\end{align*}
Using $Y=t(X+1)$,
\begin{align*}
Y
&=
t\left(\frac{1-t^2}{1+t^2}+1\right) \\
&=
t\left(\frac{1-t^2+1+t^2}{1+t^2}\right) \\
&=
\frac{2t}{1+t^2}.
\end{align*}
Thus every rational point on the unit circle different from $(-1,0)$ has the displayed parametrized form.
[guided]
We now recover the parameter from an arbitrary rational point and show that the algebra forces the displayed formula. The point $(-1,0)$ is special because we are drawing the line through it and the point $(X,Y)$. Since $(X,Y) \neq (-1,0)$, the previous step proved $X+1 \neq 0$, so the slope
\begin{align*}
t := \frac{Y}{X+1}
\end{align*}
is a well-defined rational number. This means precisely that $(X,Y)$ lies on the line through $(-1,0)$ with slope $t$:
\begin{align*}
Y = t(X+1).
\end{align*}
We substitute this line equation into the circle equation. Since $X^2+Y^2=1$ and $Y=t(X+1)$, we get
\begin{align*}
X^2 + t^2(X+1)^2 &= 1.
\end{align*}
Expanding the square gives
\begin{align*}
X^2 + t^2(X^2+2X+1) &= 1,
\end{align*}
and collecting terms on the left gives
\begin{align*}
(1+t^2)X^2 + 2t^2X + (t^2-1) &= 0.
\end{align*}
This quadratic has one root already known geometrically: the line was chosen to pass through $(-1,0)$, whose $X$-coordinate is $-1$. Algebraically, that root appears through the factorization
\begin{align*}
(1+t^2)X^2 + 2t^2X + (t^2-1)
&=
(X+1)\bigl((1+t^2)X + (t^2-1)\bigr).
\end{align*}
Our point is not the base point, so $X \neq -1$ and therefore $X+1 \neq 0$. Hence the second factor must vanish:
\begin{align*}
(1+t^2)X + (t^2-1) &= 0.
\end{align*}
Since $1+t^2 \neq 0$ for $t \in \mathbb{Q}$, we may divide by $1+t^2$ and obtain
\begin{align*}
X = \frac{1-t^2}{1+t^2}.
\end{align*}
Finally, substituting this value into the line equation gives
\begin{align*}
Y
&=
t(X+1) \\
&=
t\left(\frac{1-t^2}{1+t^2}+1\right) \\
&=
t\left(\frac{1-t^2+1+t^2}{1+t^2}\right) \\
&=
\frac{2t}{1+t^2}.
\end{align*}
So the rational point $(X,Y)$ is exactly the parametrized point associated to the rational parameter $t$.
[/guided]
[/step]
[step:Combine both inclusions to identify the full rational solution set]
The first step proves that every listed point belongs to
\begin{align*}
\{(X,Y) \in \mathbb{Q}^2 : X^2+Y^2=1\}.
\end{align*}
The preceding steps prove the reverse inclusion: every rational solution is either the base point $(-1,0)$ or has the displayed form for the rational number $t=Y/(X+1)$. Therefore
\begin{align*}
\{(X,Y) \in \mathbb{Q}^2 : X^2 + Y^2 = 1\}
=
\{(-1,0)\}
\cup
\left\{
\left(\frac{1-t^2}{1+t^2}, \frac{2t}{1+t^2}\right) : t \in \mathbb{Q}
\right\}.
\end{align*}
This proves the rational parametrization of the unit circle.
[/step]