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How to partially draw object when it overlays another / draw only all points of collision

lets say i have two circles, one i can see the other i cant.

i want to make it so that the non visible circle will become visible if it collides with the visible circle but only the part that is in collision can be seen (so rather than having the entire image wink into existence, it is only partially visible).

how can this be done? im sure people would need it for showing injured npc, partial overlays, or in the case of television show chowder the clothing made out of a stationary image that only appears where they are standing but these are just random ideas and i dont know where to begin learning how to do this.

thank you.
 
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