Here's the rest of the story: Now this may sound hard but it isn't. You need to take your little circle sandwich and peel up the top layer from the freezer paper back to the edge of the circle pushing the fabric away from the edge slightly so you can stitch with your zipper foot (Needle moved all the way left!) onto the very outer edge of the purple fabric that you just pulled up. Try not to stitch on the freezer paper edge. .Remember this is all going on right where the photo shows between the layers. Go all the way around and stitch a few stitches overlapping at the end Now tear the freezer paper off all the way. You can tear it down and then easily pull it off. What you have now is your circle and background. You'll want to cut away the extra circle fabric underneath up to the snipped edge of your circle. Once that is carefully done trust me here make sure you are cutting the correct piece, In the photo above you would trim back to the chunky purple edge cutting away the extra orange fabric.
You can press your piece one of two ways. If you press the circle edge outward it will look as though it is under the background. If you press the circle edge toward the middle, it will appear to be appliqued on top. I found out today that a version of this technique is in a book called Pieced Curves, So Simple by Dale Fleming. This isn't exactly the same as she shows, but close. She also address "cleavage" (uh oh I am going to be objectionable again :) such as when you make a heart shape , etc. Email me if you have questions. I am not a teacher but I play one on my blog!