In the standard transaction logging used by Exchange, each database transaction in a storage group is written to a log file and then to the databases. When a log file reaches 5 MB, it is renamed and a new log file is started. As the number of transactions grow, a set of log files is created. If a database fails, the transactions can be recovered by restoring the data from the log files.
Circular logging overwrites and reuses the first log file after the data it contains has been written to the database. Circular logging is disabled by default. By enabling circular logging, you reduce drive storage space requirements. However, without complete transaction log files, you cannot recover anything more recent than the last full backup. Therefore, in a normal production environment, circular logging is not recommended. It is usually used for public folder stores that hold Network News Transfer Protocol (NNTP) news feeds, where log file sets are not required.