A reference cycle simply means one or more objects referencing each other, such that if you drew it out on paper with arrows representing the dependencies you would see a cycle.
The (almost) simplest reference cycle is having two objects a and b that refer to each other:
a.other = b
b.some_attr = a
Naive garbage collectors work strictly off of whether or not an object is referenced by another object. In this case, if both a and b are not referred to by anything else, they still refer to each other and a naive garbage collector may not reclaim the memory. (I don’t know if Python can be trapped by reference cycles or not, though.)
EDIT: The simplest reference cycle is an object that refers to itself:
a = []
a.append(a)