Circle hooks are best suited to live bait. While there are some flies tied with them, I don't really like them. The idea behind circle hooks is that the fish will take the bait, turn away and hold the bait in its mouth. When the line becomes taunt, it will turn the fish's head and set the hook in the corner of its mouth. If you try to set the hook, it will just pull it out of the fishes mouth.

Flies with circle hooks will work on some fast striking fish, but a lot of the time, the fish will realize it has a mouth full of feathers and just spit the hook out before it sets.