Dan X. Solo, The Solotype Catalog of 4,147 Display Typefaces (p. 208):
A photo circle distorts the type, making each letter wedge-shaped, and giving a tighter, smoother appearance to the job. But if the diameter is small and the type is wide, the distortion of the letters is quite obvious.
A studio circle, which imitates what you might do by pasting the letters around a curved baseline, leaves the letters undistorted, but gives the line a loose look. If the type is wide or the diameter small, there is a noticeable roughness to the effect.