If the circle of confusion is as small as or smaller than the film grain or pixel size, that portion of the image will appear in focus. An out-of-focus point light source, such as a distant street lamp in a nighttime cityscape, will appear as a visible disk (or, depending on the shape of the camera's iris, a polygon), while larger objects simply appear blurry as the circles of each point on the object combine.
The range of distances over which points are in focus is called the depth of field.
The following diagram shows the circle of confusion from a point source at various distances. The circle in the middle image is sufficiently small to be considered in focus.
See also: