It is a suggestion from your domestic advisor, based on what is visible. I've always felt like it uses pre-knowledge of where horse/iron/copper are to make the suggestion... but have been told by reliable people that it is not true... it bases its recommendation on what is visible.
If you are new, you won't do too badly by following the recommendations... you might get annoyed that once you move to a blue circle, the new blue circles are somewhere else, though. After some experience, you will learn to ignore the advice of almost all the advisors at all times. To beat the computer, you have to play better than the computer... and you can't do that if the computer is making your decisions for you.
Locations of blue circles tend to be heavily influenced by coast tiles, and by access t ofresh water. Also, they do not make a distinction between a resource you can use early (like corn) and one you won't have use of for a while (like spices)... it just tries to maximize the number of resources with all of them treated equal.