Well, since the circle is defined as the locus of all points in a plane which are all a fixed and equal distance from the center, it is fairly intuitively obvious that the implicit equation maps to a circle. A more general case of the formula you presented is x^2 + y^2 = r^2 where r is the radius of the circle. Perhaps a general way to derive and illustrate how that equation makes a circle is to examine the circular definition of the trigonometric functions. We know that sin(theta) = y/r and cos(theta) = x/r where r is the radius and (x,y) is the coordinate of the radius' intersection with the circle. I'm also presuming you're familiar with the identity sin^2(theta) + cos^2(theta) = 1. Placing our unit circle definitions in place of the identity yields x^2 + y^2 = r^2 which may intuitively illustrate how it makes a circle.
Probably a better way of thinking about it is this: given any ordered pair (x,y) satisfying x^2 + y^2 = r^2, (x,y) must always be some fixed distance r from the center; hence, the equation produces the locus of all points on a plane an equal distance from the center. In other words, x^2 + y^2 = r^2 maps to a circle.