Why is aurora borealis circular in shape when viewed from space?
The aurora emissions you see are not actually circular, but rather oval shaped. They can look somewhat circular but they usually distend toward the nightside (i.e., anti-sunward side) because the Earth's magnetosphere is stretched on the nightside (forming the geomagnetic tail or magnetotail). The tail forms due to the asymmetry in the solar wind dynamic pressure. In fact, most of the electrons that generate the aurora come directly from the magnetotail, not the solar wind.
I thought that the aurora is formed when charged particles from the sun ionize the earth's atmosphere.
I wrote two other detailed answers at https://physics.stackexchange.com/a/382414/59023 and https://physics.stackexchange.com/a/335325/59023. The basic idea here is that electrons with kinetic energies in the ~1-10 keV range strike neutral oxygen or nitrogen and excite their orbital electrons which then emit photons during the de-excitation of the excited electron. The characteristic bright green you see is from oxygen.
Unfortunately, many of the popular science articles get the source wrong. They often say that charged particles from the Sun hit the upper atmosphere. Most of the particles come from the geomagnetic tail, not directly from the solar wind. They are accelerated toward Earth by processes like magnetic reconnection and wave-particle interactions with electromagnetic fluctuations like Alfven waves and whistler waves.
Why the aurora focus around the geomagnetic poles is also confused in these popsci articles. The has to due to mirror forces acting on charged particles orbiting a magnetic field and moving along it. The more detailed explanation involves so called adiabatic invariants of charged particle motion (e.g., see answer at https://physics.stackexchange.com/a/670591/59023). The basic premise is that the dominant magnetic field geometry of Earth, close to the surface, is that of a giant dipole (it's tiltled off from the geographic poles by ~11 degrees). To move toward the Earth near the equator would require particles to move across the magnetic field. It is possible to do this, but the Lorentz force tends to make this very difficult. The only places where the magnetic field points towards the Earth's surface are near the geomagnetic poles (Note that magnetic north is near the south geographic pole). So the one place where particles can move roughly along the magnetic field toward the surface are near the geomagnetic poles.
I cannot understand why that can happen only in this circular ring.
It's not actually circular. It's more oval-shaped or oblate than circular, most of the time. It distends into the nightside more than the dayside due to the stretching/compression of the geomagnetic field.
Are there any simple explanations for this phenomenon?
The distortion of the nominal dipole magnetic topology due to the solar wind and other magnetic anomalies tends to make the magnetic poles distorted toward the nightside (i.e., away from the solar wind) more than not. This results in the oval shape. It can become more circular during "quiet times."