Circles of rank or withered grass, often seen in lawns, meadows, and grass-plots. Said to be produced by the fairies dancing on the spot. In sober truth, these rings are simply an agaric or fungus below the surface, which has seeded in a circular range, as many plants do. Where the ring is brown and almost bare, the “spawn” is of a greyish-white colour. The grass dies because the spawn envelops the roots so as to prevent their absorbing moisture; but where the grass is rank the “spawn” is dead, and serves as manure to the young grass.
You demi-puppets, that By moonshine do the green-sour ringlets make, Whereof the ewe not bites.
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894