What is the difference between relative and absolute cell references and how do they relate to circular references?

Relative references (e.g., A1) change when a formula is copied to another cell. Absolute references (e.g., $A$1) remain fixed. Circular references often arise when relative references create a loop when formulas are copied. Using absolute references strategically can prevent this. For example, if a formula needs to always reference cell B2, use $B$2.