Yes, the name "Circles" is awesome. It's agressive and appealing when seen from the perspective of "what do you offer that's better than Facebook", but also generically pleasant if you just encountered it as a product.
Yup. Circles was also the name of social groups in Microsoft's threedegrees software.
If they wanted an RTM then they should have gone for a misspelling.
It's actually kind of confusing. Saying you 'circled' someone sounds odd, since it's not quite accurate. 'in your circle' vs 'in my circle' is kind of clunky compared to 'following me' or 'I follow'.
They don't offer anything related to groups of friends, though. It's a generic implementation of the usual 'following' set up.