What is the algorithm applied to create a circular array in javascript?

I have a code like below.

var t = [1, 2];
t[2] = t;

This creates a circular array. What is the algorithm applied to create this circular array in javascript.

There's no algorithm involved. It's just that your array refers to itself. When a variable or property refers to an object (arrays are objects), what's held in the variable is an object reference, which is a value that tells the JavaScript engine where that object is elsewhere in memory. You can think of it as a number that uniquely identifies a memory location where the object is. (That isn't what it is, but it's a handy way to think of it.)

Let's look at the code. You start with:

var t = [1, 2];

That creates an array and stores an object reference for it in t. That creates something somewhat like this in memory (various details omitted for clarity):

                  +−−−−−−−−−−−−−−−+
t:{Ref18465}−−−−−>|    (array)    |
                  +−−−−−−−−−−−−−−−+
                  | length: 2     |
                  | 0: 1          |
                  | 1: 2          |
                  +−−−−−−−−−−−−−−−+

The Ref18465 I've shown is a stand-in for the object reference, which we never directly see in code. We have an array, and a variable containing an object reference saying where the array is.

Then your code does this:

t[2] = t;

That adds a new element to the array containing the object reference of the array, making it refer to itself:

              +−−−−−−−−−−−−−−−−−−−−−−+
              |                      |
              \   +−−−−−−−−−−−−−−−+  |
t:{Ref18465}−−−+−>|    (array)    |  |
                  +−−−−−−−−−−−−−−−+  |
                  | length: 3     |  |
                  | 0: 1          |  |
                  | 1: 2          |  |
                  | 2: {Ref18465} |>−/
                  +−−−−−−−−−−−−−−−+

Now, both t and t[2] contain the object reference to the array. As you say, the array refers to itself. There's no particular algorithm involved, it's just a circular data structure.