Suppose you have a tree hierarchy where (among other members) “3” is the parent of “8”, “8” is the parent of “B” and “B” is the parent of “E”. You could easily draw this as a branch structure where the members could be profit centers of a company, divisions of government, managers and employees, product lines, cell references in an Excel sheet or pretty much anything that can be described as a hierarchy.3 --8 --B --E
Now, if we say that “E” is the parent of “3”, we’ve created a circular reference, and we end up with an infinite recursion. What that means is that if you follow the tree from the root to the leaf level, you’ll end up going round and round in circles. In terms of a database query, that means that the query will go on forever until it either fills up your log file or tempdb, or until the maximum number of recursions (OPTION MAXRECURSION) is reached, whichever happens first.
I did something similar a while back with foreign key dependencies. Because foreign key relationships are potentially cyclical graphs, they can easily fall into the same scenario.