I believe it sets a rally point. Click on it, then click on the map somewhere, it should ask you what kind of rally point you want.

I think you have to set a rally point first, using hotkey "P" or the silver thing that looks like an arrow pointing into a bull's eye that's next to the spy symbol on top left of your "dashboard" (the bottom part of the main screen). Then when you click on the arrow/circle thing in the planet info box you'll get a list of rally points and you can select which one you want to assign the ships being constructed at the planet to. It's very useful. If you've successfully assigned the rally point, the circle you're talking about should turn blue.

Thanks