Unlike classic programming languages like Basic, Pascal and C, spreadsheet programs determine the proper sequence for evaluating all formulas you've specified in your spreadsheet model. This frees the user from having to "program" the proper evaluation sequence or precedence relationships between the cells. It is a major labor saving feature. Unfortunately, it also allows the user to make mistakes.
For instance, the average age formula in cell B7 was typed incorrectly. Instead of B2:B6, the range was entered as B2:B7.
This is a case of the chicken and the egg. In order to evaluate the formula in cell B7, Excel must know the numeric value of B7. But, before Excel can know the numeric value of cell B7, it must evaluate the formula. Clearly, this is an impossible circle (a.k.a., circular reference).
99% of the time, circular references are caused by simple typos. One percent of the time they are caused by illogical thought processes. 100% of the time they are mistakes.
