Usually, the Dedekind eta function is understood as a function of
$\tau\in\mathbb{H}$ (complex upper half plane) where
$q=\mathrm{e}^{2\pi\mathrm{i}\tau}$.
This way, the modular symmetries of $\eta$ can be expressed
easily and the branching issues with $q^{1/24}$ can be avoided.
In this answer, I will not make use of modular symmetries,
but perhaps some other answer will,
so let us stick to the convention of regarding $\eta$ as a function of $\tau$
and use another symbol when we regard it as a function of $q$.
Following Michael Somos's example at the product identity website
linked in the question, I will write $h(q)$ for $\eta(\tau)$.
Dividing by $h^4(q^4)\,h^4(q^2)$ and isolating the rightmost summand,
your identity in question becomes
$$\frac{h^{10}(q^4)}{h^4(q^2)\,h^4(q^8)} -
\frac{4\,h^4(q^8)}{h^2(q^4)} = \frac{h^4(q)}{h^2(q^2)}
\tag{*}$$
Apart from having some power of $q$ as overall multiplier,
the factors of eta products (and quotients) can be written as
$1+a_n$ with $a_n=\operatorname{O}(q^{kn})$ for some $k>0$
with $k$ and the implied $\operatorname{O}$ constant not depending on $n$,
therefore $\sum_{n=1}^\infty |a_n|$ converges absolutely for $|q|<1$,
and we can reorder the factors accordingly. Using rules like
$$\begin{aligned}
\prod_{n=1}^\infty (1-x^{2n}w)(1-x^{2n-1}w)
&= \prod_{n=1}^\infty (1-x^n w)
\\ \prod_{n=1}^\infty (1+x^n)(1-x^{2n-1}) &= 1
\end{aligned}$$
for $x=q^k$ and applying Jacobi's
triple product identity,
we find
$$\begin{aligned}
\frac{h^{10}(q^4)}{h^4(q^2)\,h^4(q^8)}
&= \prod_{m=1}^\infty (1-q^{4m})^2\,(1+q^{4m-2})^4
= \left(\sum_{n\in\mathbb{Z}} q^{2n^2}\right)^2
= \vartheta_3^2(q^2)
\\ \frac{4\,h^4(q^8)}{h^2(q^4)}
&= q\prod_{m=1}^\infty (1-q^{4m})^2\,(1+q^{4m})^2\,(1+q^{4m-4})^2
= q\left(\sum_{n\in\mathbb{Z}} q^{2n(n+1)}\right)^2
= \vartheta_2^2(q^2)
\\ \frac{h^4(q)}{h^2(q^2)}
&= \prod_{m=1}^\infty (1-q^{2m})^2\,(1-q^{2m-1})^4
= \left(\sum_{n\in\mathbb{Z}} (-q)^{n^2}\right)^2
= \vartheta_4^2(q)
\end{aligned}$$
where $\vartheta_2, \vartheta_3, \vartheta_4$ are Jacobi thetanull functions.
Therefore (*) is equivalent to the identity
$$\vartheta_3^2(q^2) - \vartheta_2^2(q^2) = \vartheta_4^2(q) \tag{**}$$
This is one of six formulae that relate theta nullvalues with those
corresponding to halved or doubled period ratios.
It can be shown by reordering the nested sum for $\vartheta_4^2(q)$
in a chessboard-like manner:
$$\begin{aligned}
\vartheta_4^2(q)
&= \sum_{u,v\in\mathbb{Z}}
(-q)^{u^2+v^2}
= \sum_{\substack{r,s\in\mathbb{Z}\\r+s\text{ even}}} q^{r^2+s^2}
- \sum_{\substack{r,t\in\mathbb{Z}\\r+t\text{ odd}}} q^{r^2+t^2}
\\ &\stackrel{\substack{r = k - m\\s = k + m\\t = k + m + 1}}{=}
\sum_{k,m\in\mathbb{Z}} q^{2(k^2+m^2)}
- \sum_{k,m\in\mathbb{Z}} q^{\left((2k+1)^2+(2m+1)^2\right)/2}
= \vartheta_3^2(q^2) - \vartheta_2^2(q^2)
\end{aligned}$$
You may be interested in writing down the other period-ratio doubling
and halving formulae and transforming them to eta product identities
that involve power products of $h(q), h(q^2), h(q^4), h(q^8)$ only.