matlab is telling you exactly what you need to know

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functions and scripts are two different types of .m files. The main difference is that a function can take arguments, and will keep all of its variables in a separate workspace, and a script cannot take explicit arguments, and shares the main workspace.
by calling circle([0,0],R_earth,200,'g');, matlab is interpreting this as calling the circle function with those arguments, however, you've written circle.m as a script - it doesn't need any arguments to plot the earth circle.
you'd either need to rewrite circle.m as a function, or to call it as if it's a script.