I am not certain, to be honest, just how long the circle has been a magical symbol. I will presume that it has been so just on this side of eternity. At least by the time of Socrates and Plato it has been a symbol of the micro/macrocosm, as evinced by the Socratic description of the Ouroboros as a fully self-contained reality. The magic circle used by many ceremonial magicians, as well as Pagans, today, shares in that quality.
The circle is, simply, a microcosm or, if you prefer, a symbolic representation of a perfected and dedicated creation. It uses employs Frazer's law of sympathy, one of the few things he got right. Its easy; manipulate the signifier and the signified is manipulated as well. Okay, maybe not that easy. I think I'll go back to the microcosm/macrocosm thing.
I think there are, really, two ways to look at this, and though they are different ways of speaking, I think they are, ultimately, saying the same thing. On the one hand the circle is a perfected symbol of creation. All the colors, lights, smells, etc., those are to create a better harmony between the circle and what it represents. But the circle can also be a specific creation; one might imply that the Sefer Yetzirah teaches one how to go about this. Its through this understanding that a lot of magic is done, especially the more Medieval and Renaissance styled stuff and its what all those hexagram and pentagram rituals from the Order of the Golden Dawn are geared towards; creating a universe with a specific intent. The theurgist, for one truly is a God-Worker when creating a universe, is able to create a Space and fill it with specific harmonies. You want the energy of Mars in Libra, you can do that. You want the energies of the sub-element of Water of Air, you can do that, too. It is, I think, the genius of modern systems of ceremonial magic. No longer does the magician need to wait for a particular astrological occurrence to harness its power, no longer does a negative aspect corrupt a working. In the universe you create those corrupting influences are non-existent. In the universe you create the precise astrological aspect exists in eternity.
That's its beauty, but also its danger. Or maybe seduction is a better term.
It is so very easy to become arrogant, you are the creator of universes, after all. We forget that there is always something bigger out there, the non-theistic (in the loosest sense of the term) systems tend towards that more than the theistic ones, but everyone gets it to some degree. Beyond that, we forget to take responsibility for our creation and the things that inhabit it. Magic is life, where ever we do magic, there is life. If we are the god (notice the small "g") of that life, do we not have responsibility for it? This ties in with concepts of morality, but those can wait for later.
But, as I said before, this is that. Micro/macrocosm and harmony with creation as it is all around us, for there is no place that we can create that God hasn't already created and there is nothing that we seek that does not already exist somewhere.
Ouroboros indeed. But we must choose between that, and the crooked serpent. Both are biting their own tails and, unfortunately, all we can usually see of them are their heads. So, be careful; either we crush its head with our heel, or our heels are bitten.