as played in Malcolm in the Middle episode dinner out in season 2, it's a game where you have to avoid looking down and seeing someone with his/her hand in a circle below their waste. The opponent tries to trick you by saying something like "look a dollar" or is that your wallet down there" etc. If you do look at the hand formation of a circle, the person that tricked you gets to hit you in the arm as hard as he/she could.
wanna play the circle game? no ive had enough pain today after getting my ass whooped by some jock
A game for two or more players in which one player makes a circle with his/her hand (sort of like an "OK" sign, or similar to the American Sign Language letter F) below their waist and attempts to get the other player(s) to look at it. If at least one other player looks at the person's hand in while it's making this sign below the waist, the person who got the others to look at their hand gets to punch all of the players who saw the circle, generally in the arm/shoulder area. This is generally a game that's played all day and out of the blue. The idea is to catch the other player(s) off guard and get them to look at the "circle" below your waist to get the privilege of punching them.
Player 1 and Player 2 are good friends and know that the Circle Game is always in play.
Player 1: "Hey dude, check out this bruise on my knee."
*Player 2 looks down at Player 1's knee, and sees that Player 1 has made the Circle sign below his waist*
*Player 1 punches Player 2*