The circular economy is an alternative to our current linear economy based on take[1], make and throw away, which assumes the earth has infinite resources. It is an economy designed to be regenerative and restorative, keeping resources in use at their highest value for as long as possible. It is an economy where we:
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1. Only use sustainable inputs and renewable resources;
2. Use loops to endlessly cycle technical and biological nutrients ; and
3. Minimise waste and negative externalities[2].
   
   

Practically that means an economy where products, components and materials are designed and made for reuse, refurbishment, recycling and safely returning materials to the planet. A useful diagram and video for the framework has been developed by the Ellen MacArthur Foundation:

Source: Ellen MacArthur Foundation - the "butterfly" diagram and video Re-thinking Progress: The Circular Economy
[1] Extracting raw materials from the planet like oil, gas, coal, metals, minerals and trees.
[2] Externalities: consequences (costs or benefits) of an activity which affect other parties that do not choose to incur those consequences.