Haven't played with settings that much yet but it could easily be they're "hiding" people in their circles.
I think we'll need to teach people how to be "Social" on internet from scratch when G+ hits the masses. Facebook has done a terrible job so far.
Being "Social" doesn't mean being "open", and it has nothing to do with privacy. The fact you know people doesn't mean you want the world (or anyone of your "Friends") to know it. I mean this has unlimited user cases (except on Facebook) but one could be about "Business" Circles.
Anyway, back to the question, indeed is a setting and even a easy one (good job, again): Network Visibility.