A circular reference is a series of references where the last object references the first, resulting in a closed loop. It's most commonly found as an error when working with spreadsheets. And while it's defined as an error in this context, it doesn't necessarily mean it's illogical. But this aside, resolving the problem is a matter of dissecting and tracing the formula components to their roots which in most cases is fairly straightforward.
We run into circular references in the wild quite a bit. A dictionary is considered a circular reference because ultimately all the words are dependent on each other. The effect of increased wages on prices, which in turn affect wages is another such loop...which causes a lot of stir. The challenge in the world outside of spreadsheets is the difficulty in breaking down the problem into definable root parts and solving for those, and thus breaking the loop. Instead we often don't dig deep enough. We try repairing one part of the formula without addressing the others. The loop continues.
Some circular references are okay to be left alone because the stakes aren't as high. The dictionary serves us fairly well. But sometimes we need to challenge ourselves to do more digging, seek more understanding, have more empathy and see what's really on offer. Humans can do this better than computers...when they choose to.