It is unknown what its exact purpose is but the circle is described as dark place thirsty for dark thoughts and feelings. It may have been built to harness or cast dark magic. Those who enter the circle are susceptible to its magic. Depending on what a person says, does, thinks or wishes, the circle will cast a curse related to this. Each of its spells require something different to be broken such as going to the circle on a specific day or in a specific time or reliving a certain memory. However, sometimes, it can affect those who wander near enough to it. Its magic can even effect mermaids. The Stone Circle appears to grant wishes but it never grants what you really want.
The Stone Circle was built thousands of years ago before the waters around Australia were swallowed by the sea. It was built by humans who may have had some knowledge of sorcery though it is unknown what its builders intended to do with the circle. After the sea covered it, it remained hidden for centuries, undiscovered by humans. However, it earned a reputation among the creatures of the bay and they all knew not to enter it, implying that, prior to the start of the series, some sea creatures may have fallen victim to the circle's curses.
The Stone Circle possesses its own form of magic which is different to mermaid magic. Unlike the Moon Pool, it does not require the Full Moon to be activated. It is very unpredictable. It can hear the wishes, pleas, thoughts, history or intentions of those who enter it and can use its magic on them. Sometimes, it can activate without having a living creature in its center though this may only occur on a full moon when magic of all kinds seems to be at its strongest. However, all its curses can be broken.
In "Memory Lapse", the Stone Circle heard Cleo's wish to forget about being a mermaid. While she didn't know about its power and she meant to not be a mermaid at all, the circle took all her memories about being a mermaid. The spell could be broken by returning to the circle at night and wishing for the return of her memories.
In "The Return of the White Mermaid" the archeologist, Stanley Finch entered the circle. Stanley travelled to Dolphin City to find the White Mermaid's shipwreck and the circle's magic responded to this fact. It stole Stanley's spirit and let Edward the Cruel's spirit take over Stanley's body. The revived pirate wished only to find his gold but if he found it, the pirate would remain in Stanley's body for as many moons as there is gold in Edward's treasure. Only a strong memory had the power to return Stanley to his body.
Taking a Mermaid's Human Form
In "Three Days Underwater", the Stone Circle utilized its magic on its own. It summoned a mystical tide in the form of a whirlpool. As Rikki swam above the circle, the whirlpool sucked her into its vortex. The water held a stream of green energy which wound around Rikki's tail and melted into it. This spell robbed Rikki of her ability to assume human form when dry. The spell could only be reversed on the full moon when the enchanted current returned. If she missed this current, Rikki would remain trapped in mermaid form forever.
- Despite not being a character, the Stone Circle still serves as a secondary antagonist in the series.