Cherry picking the above, I want to point out that just because the other people in the circus scene do not say that they have never seen anything like it does not mean that they have ever seen anything like it prior to the circus. A perfectly reasonable inference here is that many people at the circus are repeat customers, like, say, the goblins. They have seen it before, but only AT THE CIRCUS. They don't necessarily have a clue what it is, but they have seen it before.
That's just my two cents and I can certainly be completely wrong here.