Outside of this circle are the ordinary friends and family, those people whose welfare we care about, who we feel a connection to, but don't seem as vital to our lives. We like these people and would undoubtably be saddened if they were to suddenly vanish from our lives or to suffer an accident, but they aren't as important to us.
The circles widen and the empathy lessens the further away you get. Eventually you reach people who we might feel a slight twinge of empathy for if you heard about some tragedy in their lives, but so distant that it does not compel any real action. You can read about these people and their tragedies in the newspapers all the time, but few people ever feel the urge to put any time or money into helping them.
People can rise and fall through these circles. Usually it's a slow process, as you get to know and depend on someone, but sometimes it can be a swift process (for instance a media campaign can quickly raise the profile of an individual or a group, although the attention doesn't tend to last long).
People seem to have some low-level empathy which affects anyone near them. Most people will help someone in direct danger if there is no downside to doing so, although over-exposure can dull this, leaving the homeless begging unnoticed by the side of the road.
Some people's empathy extends further than others, or in directions that others might find strange - placing animals above most humans, or feeling something like empathy for a place or for a prized possession. But everyone discriminates in some way, valuing some people more than others and caring in lesser amounts the further you travel from them.