Not everyone works within a circle when holding rituals or making magic. That being said, in those magical traditions in which the circle is used there are two primary reasons for doing so.
1. The circle is an energy construct which prevents unwanted energies and/or entities from interfering with the magic user during their workings.
2. The circle is also cast to contain the magical energies raised during ritual or spellwork until the magic user is ready to release those energies to their desired goal.
Finally, in those traditions of religious witchcraft such as Wicca, the circle also defines sacred space wherein the individual or coven can hold their spiritual ceremonies.