difference between methods of drawing shapes

Selection Tools create pixel Selections, Path Tools create Paths which do practically not lose quality on repeated transformations and Vector Masks can be output as vector content in eps and pdf.

so what would happen if i create circle with selection tool and fill it with color..then save it and then enlarge it?

It has to be interpolated and that may, depending on the transformation, result is a noticeably bad quality of the edge.

So my question is how would one create colored logo that can be enlarged or shrink-ed as needed without it losing the quality?

Create Paths and use them as Vector Masks on Solid Color/Shape Layers.

Or do it in Illustrator or another vector oriented program.

The Ellipse tool can create paths, colpr pixels as well as shape layer.  A shape layer contains the ellipse Path. The shape Path can be stroked with many styles of stroke and alignments and if  the path is a closed path it can be filled with a color or pattern or left empty.  If you re-size the layer or document you will not be asked to rasterize a shape layer. Shape will be resized using vector graphics.  Shape layers can also have layer style added.

stribor-stribor wrote:

 

so if you dont care about output you can use pixel tools or vector tools regardless

If you don't care about your results why use Photoshop? Its expensive...

so if you dont care about output you can use pixel tools or vector tools regardless

Certainly, it’s each users own decision how much thought and foresight they want to put into a project.

But maybe you should consider that some customers may consider everything they have omitted to specify (like that a product will be used at much larger sizes later on) to be implied and may be unwilling to take responsibility for causing unnecessary work.

Use the right tool for the job at hand.  There are many way to do things some ways are better the others. One does not learn Photoshop overnight.