Suppose the lens focuses on the yellow dot as shown in the figure below. This subject generates a yellow dot on the image plane. Once focused, all subjects that have the same subject-lens distance as that of the yellow dot will appear sharp. Now, consider a white dot that is behind the yellow dot (i.e., with larger subject-lens distance). Since it is out of focus, it will not produce a sharp white dot image. Instead, its image is formed somewhere in front of the image plane. On the image plane, the image of this white dot is a circle as shown below. This circle is usually referred to as a circle of confusion. As the subject-lens distance increases, the size of this circle increases. The same holds true for a subject in front of the yellow dot (e.g., the green dot in the following figure). Since these circles of confusion are actually out of focus images of subjects, if we can reduce the size of circle of confusion, we can increase the sharpness of the resulting image. But, how?
It turns out to be very simple. Since circles of confusion are formed by light rays passing through the lens tube, the size of a circle of confusion is proportional to the amount of light that can pass through the lens tube. This means smaller (resp., larger) circles of confusion will be formed if less (resp., more) light can pass through. Restricting how much light can pass through the lens is the function of the diaphragm in the lens tube that sets the aperture values. Therefore, a smaller aperture means a smaller diaphragm opening, which, in turn, means allowing less light to strike the film/CCD plane. Thus, we have smaller circles of confusion and, as a result, a sharper image!
