The Circle Pattern tool is intended for use in creating full circle items, like skirts. These are stand along patterns and not part of any existing patterns you may have on the canvas.
Select a location on the canvas with plenty of room to draw the circle.
Enter a value for the Circumference. This is the circumference of the center opening of the circle. This would be the total waist measurement.
Next, enter the Length of the skirt. This is the distance from the center circle (waist) to the bottom edge of the pattern. This translates to the length of the skirt when sewn (ignoring hems, etc).
There are many other creative uses for this tool, such as flounces or peplums.