As you can see, I don't have hundreds of Circles - although I wouldn't necessarily be opposed to having that many either. Here are my top 5 reasons for using Circles:
An obvious initial reason for segregating users into Circles is to limit the scope of information that you share. Again, this is a key driver behind my [Colleagues] and [Family] Circles. Having the ability to post information directly to those groups allows me to limit information from being seen by people that it might not be relevant for.
Example: I'm at the beach and I use my mobile phone to take some photos. When I get home, the photos are instantly sync'd with my G+ account as soon as my phone hits the Wifi. From there it's just a couple of clicks to share those photos with my family members by posting them to the [Family] Circle.
I know how frustrated I feel when I see other people clogging up my feed with their own personal interests (e.g. excessive posts about cats) and so, I believe that it is really important to be aware of and manage to the amount of "noise" that I emit to other individuals.
Example: I'm confident my [Hockey] friends don't mind me posting several updates a day about hockey related stuff (e.g. pictures, embedded YouTube video's, etc.). However add that up with my [Developer Community] related posts, and a few other general posts and suddenly I'm at risk of having people de-circle me because I'm too noisy.
Having a [Hockey] circle allows me to post hockey-specific stuff to just those members and thus reduces the amount of "noise" that I'm sending to people with no interest in hockey whatsoever.
Tip: A neat feature is [Your Circles]. [Your Circles] is one step back from [Public] and allows you to easily share information with the widest scoped audience. In Settings you can manage how wide that scope is by managing which Circles are included in the [Your Circles] scope:
The Internet provides us with unlimited opportunities to access information, but managing the signal to noise level is a constant challenge. [News and Information] and [Tech News] are Circles where I've add lots of providers and therefore receive a great deal of information. To deal with the resultant "noise", I then tune the volume of information I receive from them in my main feed by using the following tools.
Tune the amount of information displayed in the main feed
Click on filters to display all items for a given Circle
Drag Circles to change their order so that most common ones are displayed first
Search and Organize
In addition to the above mentioned benefits, posting to Circles acts as a way of grouping so that content can easily be found later from among the masses of other posted content.
Example: Although I may not remember the exact content of something posted, I may be able to find it by recalling that it was [Hockey] related. Given that knowledge I could filter my main feed by the [Hockey] Circle and then scroll through the reduced amount of information to locate a post I'm after.
Integration across the Google landscape of products
Given the integration of G+ across the Google sphere of products, it shouldn't come as a surprise that your investment Circles can be leveraged in other applications.
Example: Circles flow through into Gmail, and therefore provide a useful way to find and organize communication from contacts by filtering based on the Circles they belong to. This is a key driver behind having my [Hockey], [Family], and [Business] Circles.