Strange looking convoy...
 

http://i874.photobucket.com/albums/a...e/wolfpack.jpg

The circle is reserved for submarines... so a large circle must be a group of them, right? Is it a wolfpack or a school of whales? I couldn't catch up to them.

Your correct...the circle informs you the lead element of the convoy is a submarine but not necessarily all of it.

If the lead element had been a ship the screen would have shown a squre or a diamond but there may still have been a submarine within its ranks.

In other words...it is the type of vessel that is the lead element that dictates the shape on view.

And by lead ship, do you mean the ship on point at the front, or the ship that is the first element that was laid out in the editor?

Lead ship is the middle ship in the front row of the convoy.

Some times this circle means that the convoy is followed by a U boat. I have seen it when I intercepted such a convoy. I saw an IXB with the external view. Pity , she didn't attack the convoy.
In fact this AI sub will never attack with torps so don't expect a wolfpack attack here. You are alone.
The only benefit you might have is that the escorts will have and someboby else to deal with.

As stated by HW3 above.

Okay, so I came across another circled convoy off the eastern US. I intercepted, but had to break off (7 fletchers!). Everything was pissed off: the merchies were zigzagging and the escorts were moving very erratically. One ship was falling out of formation with what appeared to be lots of 10.5 shell holes...

That convoy will have been attacked by one or more AI U-boats....they can only fire the deck gun.