Originally posted by NiceGuy:

Nr. 3
It's not the campfire which prevents the monster spawn it's the workbench. Within the workbench building radius there will be no spawning.
You can burry the workbench or built a little hut around it.

stonecutter and black forge and forge all have the same effect. but they dont show the radius like the bench does.

also portals also do that around them but smaller area. probaly to prevent teleport ganks from enemies^^