Lets look at an easier problem.
Suppose 2x<sup>3</sup>-5x<sup>2</sup>+4x+6=0 has roots α, β, γ. Find an equation with roots 1/α, 1/β, 1/γ.
Solution.
Replace x with 1/x.
∴ 2/x<sup>3</sup>-5/x<sup>2</sup>+4/x+6=0.
∴ 6x<sup>3</sup>+4x<sup>2</sup>-5x+2=0.
x is a dummy variable. That's why we can say "replace x with 1/x". It's the same with locus.
But if you don't like saying "replace x with 1/x", you can instead do it like this:
Let y=1/x.
∴ 2/y<sup>3</sup>-5/y<sup>2</sup>+4/y+6=0.
∴ 6y<sup>3</sup>+4y<sup>2</sup>-5y+2=0.
The result is the same, with dummy variable y instead of x.
It's the same in locus problems. In my syllabus solution, instead of saying "replace z with 1/z", you can say "Let w=1/z" and get the same result, i.e, the same circle with the same centre and same radius, but with a dummy variable w instead of z in the equation.
Hope that helps.