I just Googled (on Magic Loop Ring) and found a great photo essay right HERE! It must be an article from before the big change over. Well, it's dated 12/05. Sorry, I'm not trying to keep you in suspense, it's here, http://www.crochetme.com/Dec_Jan_0405/reads_round.html
I think it will answer all your questions, but ask again if not.
In knitting, the magic loop is a way to knit in the round with one long-cabled circular needle (instead of using two circs or four double-points). In crochet, the link pauline3 gave above shows you how to begin to crochet in the round by making a looped ring instead of using chains as your foundation ring.
Fueling the crochet revolution...
I love me some magic loop. I use it on anything that starts with a chain circle. no more open tops on the hats.
Hardcore? Hardcore is for babies. I'm HOOKCORE!
I love this! I am a dislexic left hander so it took me awhile to figure it out but once I did it was so simple. If you are left handed like me and are having problems email me with Magic Loop Help in the subject line and I will tell you what I did.