According to some historians, "Ring Around the Rosy" is a song about the plague that wiped out nearly half the population of Europe during the Middle Ages.
One sign of plague was a patch of rosy skin with a ring around it. "Pocket full of posies" probably means the fragrant flowers that doctors would stuff in their pockets to ward off the bad smell when they visited plague victims. And "ashes, ashes, we all fall down" means that everyone dropped dead. The song was probably made up during one of the plague periods.
The plague itself was caused by bacteria. In the Middle Ages, plague was spread by fleas and other parasites that lived on small animals like rats. When rats died, their plague-carrying fleas needed to find another host, namely people. The disease makes it hard for a flea to swallow, so when it bites and begins to suck blood, it chokes and vomits the blood and plague bacteria back into the person's skin.
Unfortunately, as long as there are rats with fleas, there'll be plague. Every year a few cases even crop up in the United States. But thanks to antibiotics, plague isn't nearly as deadly as it used to be.