In this section Abram (meaning 'exalted father') becomes known as Abraham (meaning 'father of many') as God promises Abraham that he will greatly increase his number, or family.
17:6 '"I will make you very fruitful; I will make nations of you, and kings will come from you."'
This is on the condition that Abraham and his descendants agree to the Covenant of Circumcision.
17:10 "'Every male among you shall be circumcised."'
17:14 "'Any uncircumcised male, who has not been circumcised in the flesh, will be cut off from his people; he has broken my covenant."'
Abraham did as God told him, with himself and all of his household.
It isn't written why God would make such a request of Abraham at the age of 'ninety-nine years old' (17:24). There is no explanation and all that is said is that if Abraham does this he will be rewarded, and if Abraham's people don't, then they shall be rejected (a theme that occurs a lot later on). So unfortunately this is all we have, God just said so.
The practice of circumcision was not an original idea by the time of Genesis' writing. The Egyptian's and other ancient groups also practiced this as a part of health and cleanliness. Again, as will be seen in Exodus and Leviticus, the Hebrews were to our standards today excessively clean and so the practice of circumcision introduced here fits in with this. This story probably simply explains why the Hebrews practiced circumcision, in a spiritual perspective (although it doesn't actually explain much).
Nowadays in certain parts of the world it is perceived as an act of self mutilation. To me as a modern Pagan I do not think it is a necessary precaution to keep hygienic and it is unnatural to remove any part of your body like that; however, statistics show that the practice is still common in the world with a high percentage being non-Jewish American men. There are arguments about whether or not it is right to do it to a baby without his permission. For both a baby and a fully grown man it is just horrible.
*I've been informed that there is a modern Jewish movement aiming to stop this practice, saying, "We are a group of educated and enlightened Jews who realize that the barbaric, primitive, torturous, and mutilating practice of circumcision has no place in modern Judaism." More information can be found here: http://www.jewsagainstcircumcision.org/
I do not know yet if Jesus told people to actively stop doing this - because Christians generally don't practice circumcision, so I'm wondering why?