Some possibly unnecessary further details.
Panem et circenses, more properly "bread and (chariot) races". From Juvenal's tenth satire (line 80).
iam pridem, ex quo suffragia nulli
vendimus, effudit curas; nam qui dabat olim
imperium fasces legiones omnio, nunc se
continet atque duas tantum res anxius optat
panem et circenses1
Long ago, the people cast off its worries,
when we stopped selling our votes. A body that used to confer
commands, legions, rods, and everything else, has now
narrowed its scope, and is eager and anxious for two things only:
bread and races.
(trans. Niall Rudd, 1992)
The theme of the satire as a whole is the danger and futility of ambition2. The argument is that every hope, when realized, brings unexpected trouble. (In the end, it turns out that the only thing worth praying for is another Latin cliche, mens sana in corpore sano -- "a healthy mind in a healthy body")3.
The immediate context of the quote is a description of the fall of Sejanus, a man who had everything a Roman could wish for but whose very success carried him to a messy end. According to Juvenal, the people of the city were not much interested -- and should not be counted on to preserve anyone, however virtuous, from Sejanus's fate -- because they happily supported whoever happened to come out on top, being concerned exclusively with the supplies of grain and amusements.
Apart from the need to support his argument, Juvenal may have wanted to moan about the degeneracy of the Romans of his day (a favourite theme of Latin writers for generations before him); or he may have written it as a muted and roundabout criticism (the kind it was safe to make) of the imperial system, for corrupting the citizens of the city by removing their political power. He was not referring directly to the role of the games and the grain dole in keeping the Roman mob under control. The phrase is handy shorthand for the importance of keeping the urban poor fed and occupied4, though, and it's probably not a big deal that it's slightly misunderstood. All famous quotes are.
The English phrase "bread and circuses" seems to have entered common usage only in the 20th century. According to the Oxford English Dictionary, it was used by H.P. Eden in 1914 and then by Kipling (who seems more likely to have popularized it) in Debits and Credits (1926). I don't think there are any indications that the phrase or sentiment were well known in Juvenal's day.
1 The Latin text here is from the Loeb, originally published 1918. The translation's a more modern one than Ramsay's (crucially, it includes all the dirty bits).
2 Rudd's title is The Futility of Aspirations; Ramsay's is The Vanity of Human Wishes, which was also the title of Samuel Johnson's 1749 rewrite.
3 I apologize if knowing this in advance spoils the satire for you.
4 If you're in the position of having to choose, most urban mobs prefer food.