From the Super Mario Wiki, the Mario encyclopedia
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Magic Circles are special spots in Paper Mario: The Origami King. They are mainly used for activating the 1,000 Fold Arms, although they can also be used by Olivia if the circle has a Vellumental on it, and if Mario has the Bibliofold needed.
Diamond Island introduces rainbow-colored Magic Circles, which Olivia can use to transform into any of the four Vellumentals. Some puzzles require Olivia to figure out which abilities to use in sequence. In the final battle against King Olly, Olly has his own Magic Circles that he uses to turn into versions of the Vellumentals. During the final phase, Mario has to arrange a picture puzzle of a giant Magic Circle with images of Olivia on it; Olivia turns into the Olivia Hammer and Mario is able to defeat Olly by hitting him with it.
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