This tool is available in the Digitizer( Create) toolbar, or by right clicking with the Digitizer tool to the Create Area / Polygon Features menu.
To create a circular feature click and hold, then drag to resize the circle.
To create an elliptical feature, hold down the SHIFT key while dragging to also change the size of the major and minor axes. Use the Rotate tool after creating the feature if the ellipse is not oriented correctly.
Once the shape is finished, release the left mouse button and the Modify Feature Info dialog will appear allowing you to setup the label, classification, drawing style, and attribution for the new feature. See Editing Feature Attributes and Drawing Styles for more details.
Once the shape is completed, the Digitizer Tool will remain in the selected shape creation mode. Left click to start drawing a new shape, or right-click to choose a different mode.