I had a small red circle develope on my arm overnight. what could this be?

It is difficult to definitively diagnose a skin lesion based solely on a text description. I would recommend making an appointment with your doctor or healthcare provider to have it evaluated in person. They can examine the circle, take a closer look at the lesion, and determine the cause. Depending on the appearance and characteristics of the circle, it may be a common skin condition, such as a mole or a bug bite, or it could be something more serious, like a fungal infection or a sign of skin cancer.