The point is that the function $g(z) = z/(1+z^2)$ satisfies $|g(z)| \le 1$ for all $z$. Since, as stated in the question, $f(x,y) = g(x/y^2)$, it must also be true that $|f(x,y)|\le 1$ for all $x,y$.
Note that the top answer is not a full proof of the fact, but rather filling in a gap in the question asker's proof.