Step 1 :
Factor out common factor $ \color{blue}{ b^2 } $:
$$ a^2b^2-b^2y^2 = b^2 ( a^2-y^2 ) $$Step 2 :
Rewrite $ a^2-y^2 $ as:
$$ \color{blue}{ a^2-y^2 = (a)^2 - (y)^2 } $$Now we can apply the difference of squares formula.
$$ I^2 - II^2 = (I - II)(I + II) $$After putting $ I = a $ and $ II = y $ , we have:
$$ a^2-y^2 = (a)^2 - (y)^2 = ( a-y ) ( a+y ) $$