The "Circle of Fifths" is a geometrical construction, where all of the notes in the octave are layed out in such a way that the distance from note to note is a 5th, or 7 semi-tones.
Starting from C at the top, we place G (which is one fifth intervals apart, or 7 semitones) to its right, followed by D, A, etc.
The sequence of notes goes by fifths when looking at it clockwise (C-G-D-A-etc).
When looking counter-clockwise, it goes by fourths (C-F-Bb-Eb-etc).
The Circle of Fifths is used to create chord progressions.
In generic terms, as an abstraction, chord progressions are referred to by using Roman numerals. Each number refers to a scale degree. Upcase Roman numerals are used for major chords, and lowcase for minor chords.
Simple folk songs, and many classical melodies, were traditionally based on only three chords : I (tonic), V (dominant), and IV (subdominant).
For the scale of C, these chords are: C (tonic), G (dominant), and F (subdominant). For any tonality, the I-IV-V chords are adjacent to each other in the Circle of Fifths.
A progression based on three chords can be: I-IV-I-V-I.
It can be seen in the circle as oscillating back and forth around the Tonic chord.
Example in the key of E major: E-A-E-B7-E.
[The number written next to the Roman numeral denotes a chord alteration, usually chosen to match the current scale.]
Another famous progression is the : I-VI-II-V-I.
It can be seen in the circle as a 1/3 circle's jump forward, followed by three single counter-clockwise steps, back to home.
For any major scale, this progression is abstractly referred to as: I-vi-ii-V-I.
For the key of C major, this chord progression could be: C-Am7-Dm7-G7-C.
Refer to the circle to see how easy transposition can be made: In the key of G, this chord progression would be: G-Em7-Am7-Dm7-G.
Counter-clockwise movements create a progression by fourths, and it has the feeling of resolving each chords tension into the next chord.