In my sketch I want to move a smaller circle that is within a circle along the Z-axis. I've put the image below to avoid confusion. I am using Inventor 2012. Can anyone help me?
"I want to move a smaller circle that is within a circle along the Z-axis" - not possible, 2d sketches are 2d planar they have no internal z value.
If you want 3 axis values you can with 3d sketches but I doubt that this is what you need.
You will need to either create a new workplane offset from the definition plane of the first sketch and create a new sketch on the offset plane, or extrude the first sketch and create a new sketch on the extruded face.
In this new sketch you can then project geometry of the small circle to this sketch, you will need to RMB on the first sketch and make it visible to allow projection if you have extruded.
Why would you want to move the circle in the sketch. What are you trying to accomplish.
Extruded circles would result in cylindrical features
Revolved "rectangles" (see attached) would result in ______________ features (fill in the blank).