I think I've finally gotten my head around Google's intention with using "circles" for control of social networking content. It could be a really elegant solution to the awkwardness of the rules outlined by Twitter and Facebook. Some people like the openness of Twitter, and other people like the exclusivity of Facebook, but I think that Google may have managed to combine the best of both worlds and allow its users to control where their use of Google+ falls on the spectrum from Twitter to Facebook.
Twitter is a bit like microblogging; you spit out your stream of interesting observations, and people can either choose to listen to you or not. This form of sharing is most useful for celebrities or corporations or brands, who can market new products or offers on best last minute holidays or whatever. But it can also be a fun to meet new likeminded people. I like the laissez-faire, Darwinian nature of it, where, if you tweet things that are interesting enough to a lot of people, eventually you will get a lot of people listening to you.
This is the equivalent of "Public" sharing on Google+. I suspect that most of my posts on Google+ will be marked as public since I will be duplicating most of the content on Twitter, and I have a general aversion to restricted sharing.
For Google+ to completely obsolete Twitter – which I don't think will happen soon – it would need some form of tagging, because sometimes Twitter hashtags can be quite fun and useful.
When I first started using Google+, I was confused why I wasn't having to accept anyone's "friend request". I just got notified that people were "adding me to their circles", and without my permission! The problem was that I was still thinking with a Facebook mindset. Facebook demands a bidirectional relationship. If I don't explicitly agree that you can listen to my posts, then you can't.
The closest equivalent to this on Google+ is to share content to "Your circles" (e.g. everyone that you have agreed to be friends with, though not necessarily that have agreed to be friends with you!). This is a good default setting for anyone moving from Facebook to Google+. Of course you can further restrict your sharing to any arbitrary subset of your Google+ connections.
Any time someone comes along with a new way of doing things, it's a bit jarring. The more I understand Google+'s circle system, the more I like it, with the exception of being excluded from posts I would be interested in that the poster thinks I wouldn't. I think that Google's circles are simple enough for anyone to understand, but complex and customizable enough to allow for a very fine level of control for its users. Google+ is still in its infancy and is lacking many, many features that will be needed to permanently pull users away from its competitors, but I see a lot of potential and nothing spurs innovation like some good healthy competition.
In the interest of brevity, I have simplified the privacy settings on Twitter and Facebook for this post to the way that I personally have my accounts set up.