What does "circuits" mean in Cryptography? I am not a hardcore cryptographer so this might be a really stupid question. I am looking through some papers in homomorphic encryption and discovered they describe computation as "circuits", why do they use this particular term? Isn't algorithm a more suitable word? Do "circuits" have some special meaning in cryptography?
Circuits can be expressed using very simple operations. For example, a boolean circuit consists of only two types of gates, addition and multiplication (where the input values are each 1 bit). Furthermore, (boolean) circuits can describe any computation.

This is very nice when it comes to fully-homomorphic encryption. All we have to do is provide a way to homomorphically evaluate two types of gates and voila, we can evaluate any computation homomorphically. As pointed out in a comment below, circuits have been used for more than just homomorphic encryption. Secure multiparty computation (both the secret sharing and the garbled circuits variants) uses this as well.

This makes the job for cryptographers much easier, but makes things harder on users, right. If I want my super awesome algorithm to be evaluated homomorphically, I've got to come up with a way to implement it as a boolean circuit. That means no loops, no conditionals, etc. I only get addition and multiplication. Other computation paradigms have been looked at. One early one was moving from boolean circuits to arithmetic circuits (not too big of a jump). 

Update
Recent work is interested in not limiting programmers to circuits. For example this, this, and this all look at language based approaches. 

P.S. Sorry for the link dump. I haven't properly read through these so I can't really comment. A question on how non-circuit approaches work could be a good question to ask. I'm betting there is someone on here who can go into detail on those.