Pattern separation is a fundamental hippocampal process thought to be critical for distinguishing similar episodic memories, and has long been recognized as a natural function of the dentate gyrus (DG) supporting autoassociative learning in CA3. Understanding how neural circuits within the DG-CA3 network mediate this process has received much interest, yet the exact mechanisms behind remain elusive. Here we argue for the case that sparse coding is necessary but not sufficient to ensure efficient separation and, alternatively, propose a possible interaction of distinct circuits which, nevertheless, act in synergy to produce a unitary function of pattern separation. The proposed circuits involve different functional granule-cell populations, a primary population mediates sparsification and provides recurrent excitation to the other populations which are related to additional pattern separation mechanisms with higher degrees of robustness against interference in CA3. A variety of top-down and bottom-up factors, such as motivation, emotion, and pattern similarity, controls the selection of circuitry depending on circumstances. According to this framework, a computational model is implemented and tested against model variants in a series of numerical simulations and biological experiments. The results demonstrate that the model combines fast learning, robust pattern separation and high storage capacity. It also accounts for the controversy around the involvement of the DG during memory recall, explains other puzzling findings, and makes predictions that can inform future investigations.