Opposed to this, there's the social spike model -- one person knows various people, but those people don't know each other. A diagram of the relationships would look like an asterisk.
I have been pondering the advantages and disadvantages of the two models. In middle school and high school, I pretty much had a circle. Various subgroups might be hanging out at any given time, but for the most part "my friends" were a discrete group within the larger school population, and the people I would identify as my friends would be the same people that those friends would identify as their friends. Then, during and after college, I had more of a spike thing going on, where I knew a few people here and there, but they mostly didn't know each other. Now I have an oddly mixed situation, with various separate groups attached to me, but a fair amount of cross-contact within those groups (and with parts of those groups that I don't know).
The advantage of a circle situation is that it makes party planning and information transfer much simpler. If someone wants to arrange a surprise birthday party, say, they know who to invite and how to get in touch with them, since they know the same people the birthday person knows. No-one has to put a lot of effort into planning compatible personality combinations for dinner parties or anything, since those combinations are already known to everyone involved. If someone has news they'd like everyone to get but don't have the energy or time to contact everyone individually about, like a death in the family, then they can easily deputize people to spread the news, and those deputies will know who to contact.
The disadvantage of a circle is that false information, rumors or slander, can travel just as easily as good information, and any individual falling-outs can have nasty ripple effects as people try to avoid each other, but don't have anywhere else to go for social contact.
Spikes avoid those disadvantages, and give you neutral people to vent to or get advice about interpersonal conflicts from, but don't have much to recommend them otherwise. It's hard to get an objective view about a conflict from someone who only has your version to go on, even if you're trying to describe things fairly.
I'm thinking spikes may be way more common these days than they used to be, as people move around and keep in touch with a few people here and a few people there, rather than growing up in a group.
It's been an interesting thing to ponder. I would like to keep pondering it, but I ran out of thoughts. Do you have any?