Creating circles with the Advanced Editing toolbar
Click the Current Task drop-down arrow and click Create New Feature.
Click the Target layer drop-down arrow and click a line or polygon layer.
Click the Circle tool on the Advanced Editing toolbar to create a new circle.
Click where you want the center of the circle to be, then drag. A line representing the radius appears inside the circle as you draw it.
Optionally,
press the R key to type a radius.
Click once to finish the circle.
http://webhelp.esri.com/arcgisdesktop/9.3/index.cfm?TopicName=Creating_lines_and_polygons
