The Initial City Placement routine and the Blue Circle routine are actually two different routines. That said something like 98% of the time your settler will start on a blue circle.
The Blue circles aren't always the best cities. The AI doesn't take into account anything you could build in the future to make a city site better. I would say that for most any city other then the first, it's usually worth it to check out the lay of the land, and decide where to put cities on your own.
For the initial city, well, that's a whole other argument...