The distinction between direct and circumstantial evidence is important because, with the obvious exceptions (the immature, incompetent, or mentally ill), nearly all criminals are careful to not generate direct evidence, and try to avoid demonstrating criminal intent. Therefore, to prove the mens rea levels of "purposely" or "knowingly," the prosecution must usually resort to circumstantial evidence. The same goes for tortfeasors in tort law, if one needs to prove a high level of mens rea to obtain punitive damages.
One example of circumstantial evidence is the behavior of a person around the time of an alleged offense. If someone was charged with theft of money, and was then seen in a shopping spree purchasing expensive items, the shopping spree might be regarded as circumstantial evidence of the individual's guilt.
A popular misconception is that circumstantial evidence is less valid or less important than direct evidence. This is only partly true: direct evidence is generally considered more powerful, but successful criminal prosecutions often rely largely on circumstantial evidence, and civil charges are frequently based on circumstantial or indirect evidence. In practice, circumstantial evidence often has an advantage over direct evidence in that it is more difficult to suppress or fabricate. Eyewitness testimony is notoriously inaccurate at times, and many persons have been convicted on the basis of perjured or otherwise mistaken testimony. Good strong circumstantial evidence can be a far more reliable basis on which to make a determination of guilt. It should be noted that circumstantial evidence normally requires a witness, such as the police officer who found the evidence, or an expert who examined it, to lay the foundation for its admission. This witness, sometimes known as the sponsor or the authenticating witness, is giving direct (eye-witness) testimony, and could present credibility problems in the same way that any eye witness does.
Much of the evidence against Timothy McVeigh was circumstantial, for example. Speaking about McVeigh's trial, University of Michigan law professor Robert Precht said, "Circumstantial evidence can be, and often is much more powerful than direct evidence". The recent Scott Peterson trial was based heavily on circumstantial evidence.
However, there is sometimes more than one logical conclusion inferable from the same set of circumstances. In cases where one conclusion implies a defendant's guilt and another their innocence, the 'benefit of the doubt' principle would apply. Indeed, if the circumstantial evidence suggests a possibility of innocence, the prosecution has the burden of disproving that possibility.
An example from genealogy would be that if census records showed several people with the same surname lived at the same address, likely relationships could be inferred from age and gender.