Best Illustrator method to make a logo background "transparent..."

I have seen that there are several posts regarding "transparent backgrounds," but but they're difficult to follow. I apologize if this is old territory. If there is a solution somewhere already, I'd appreciate your pointing me towards it.
I'm using AI within CS5.5 but new to it. I am importing/converting a JPG file to vector format. The image is a logo with a large black circle boundry and a white opaque background. The background elements inside the boundry circle are also opaque white, and I wish to leave that as is. The edges of the circle touch the  boundries of the JPG file tangentially by about 100px or so on each side when the JPG is viewed at original size.
My objective is to make everything outside the boundry circle a "transparent" background. What would be the best/easiest way to do this within AI? Is there, for example, a tool that will draw a circle that I can expand to get on the edge of the black boundry circle, and then make everything outside it transparent?
Thanks very much.

Jacob Bugge wrote:
I am importing/converting a JPG file to vector format. The image is a logo with a large black circle boundry and a white opaque background.
The cleanest/best way to vectorize  the black circle, and most likely the other shapes, is to recreate, using the appropriate tools, thereby replacing the original raster parts.
You may use the raster image as a locked template, maybe on its own lower layer.
In that case there will be no outlying parts to get rid of.
But f you just wish to get rid of the outlying part, you may create a circle (with the Ellipse Tool) following the outer rim of the black circle, select that and the image, and Object>Clipping mask>Make.
OK, a quick progress report...
I am now back at my main desk and in front of my instance of AI. I am attempting to implement the above suggestion of using the clipping mask. First, a bit more background.
The object I'm trying to edit is a JPEG file with a logo design... a  black circle with a flat b/w design inside on an opaque white background. There is only one (1) layer, and AI reports the background as being "locked." When I open the JPEG file in AI, it appears as 100%, RGB raster (file is 2341x2344px original size). When I hover over the design with the "select" tool, I see a blue square outline (I assume this is the JPEG file boundry). The edges of the circle circumfrence touch each edge the blue square outline.
I see how to invoke the elipse tool,  and how to make a clipping mask (I have to remember to select more than one object, or I'll get an error).  But what do I do from there? How do I save just the part that remains (after clipping) on a transparent background? Everything I've tried so far seems to save it on the white opaque background.
I'm stuck at this point. All help appreciated.

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