Circles and favoriting are major ways to increase your exposure:
1. When you favorite someone's item, it shows up in the activity feed. When you're active in doing this, others will continue to see your shop name and may visit to see your products.
2. Other sellers may return the favor and heart a few of your items. That shows up as well in "their" activity feed. That one person might have 2000 others in their circle, potentially exposing your work to any of those people who might be scanning through the activity feed.
3. You can add X number of people to your circle, but there is no limit as to how many people can add *you* to their circle. Whenever you favorite somebody's item, it too will show up in the feed to all of those in your circle. Again, someone else sees that you're active, and they add YOU to their circle. When they do that all of the people in THEIR circle might see that this person added you, and be driven to your shop.
4. Many of my sales come from other sellers. Everyone is a potential buyer.
5. The more in your circle, and more importantly, the more people that add YOU to their circles, the more momentum your shop will pick up. This means more views, and ultimately more sales.
6. Treasuries work the same way. When you make a treasury, and if you mark it for "everyone" to see, as soon as you save it, it also shows up in the activity feed. More activity by you = more exposure. People will also return those favors by featuring one of your items in their own treasuries. Again, it all equals exposure.
7. That activity feed is crucial to your shop getting noticed, but unless you participate in every way possible, your shop stays hidden.
8. Join teams, lots of them. Post your new items in the appropriate thread. Post your treasuries. Participate. It's all exposure.
It's no different than if you had a physical shop and sent out marketing mailers to a big regional list. This is what the activity feed does for you.
And remember...sellers are buyers too. I never expected to have more than 200 sales in 10 months of being open (many of my customers have shops too), but I know for a fact this is due to dedicated time spent in participating as much as possible in every way etsy has to offer. Add F/B, and other social networking, and you'll increase your exposure even more.
Wish you the best of luck and success, and I hope this might help a bit to explain how it all works.
Cheers,
Donna