Circular Needle Questions..?

[pure1]

Hi, I'm going to start knitting with circular needles and I have a few questions before I begin. If anyone can help, that would be great!

1) I've seen several baby blanket patterns that require circular needles. I thought circular needles only produced tube-like structures, like bags and hats? How do you knit a blanket with circular needles?

2) I'm looking at the "Chinese Charm Bag" from the Stitch 'N Bitch book and the pattern begins as follows: CO 80 sts. K 1 row, then join ends to form a circle. How do you knit 1 row and THEN begin knitting in the round? It just doesn't make sense to me.

I know I'm just missing something....Perhaps I'm making this more complicated than it needs to be! Thanks so much in advance to anyone who can answer my questions!