I think it has to do with padding down tall grass; an evolutionary instinct.

For good luck?

My dogs don’t do this. Maybe they are too lazy to prep their sleeping space. They both just plop down where ever they want.

Cats do it too.

i guess they look for the best/comfortable way to sleep.

I agree with AstroChuck it’s leftover from the when they lived in the wild. Their natrual instinct is telling them to walk in circles to prep their bed.

My girlfriend says that this, combined with a bit of scratching is a way of checking for snakes in the grass/carpet.

i could also imagine it being to check the surrounding, just to make sure

It’s how you wind a watch dog!! ha ha!!