The term "circumstantial evidence" refers to evidence that does not directly establish the elements of the crime, but that permits the finder of fact to draw inferences about what happened. It is called circumstantial because it shows the circumstances, often of the crime scene, but in any case of something in some way related to the alleged crime.
For example, a knife found in a dead body would be circumstantial evidence, as would fingerprints found on the knife.
An eye-witness account of the crime would be direct evidence, not circumstantial evidence. So would a video of the events of the crime, say from a security camera. Most physical evidence is circumstantial evidence. Much eye-witness is direct evidence. There is also opinion evidence, also known as expert testimony. In a US court at least, pretty much all evidence falls into one of these three categories.
Circumstantial evidence can be misinterpreted, and it can even be faked, although that is comparatively rare. Direct evidence can include lies, misunderstandings, and particularly misperceptions.1
For example, a witness sees two people struggling, hears a shot and sees a flash, then one drops dead. This is direct evidence, not circumstantial. But does it prove murder, or even intentional killing? It need not; one person could have drawn a gun and the other struggled to seize it, and the gun fired in the struggle, killing the person who originally drew it, with no one intending that result.
On the other hand, suppose a victim reports a rape. Semen is obtained from the victim's person. The victim shows bruises and injuries characteristic of rape. DNA tests match the accused, as do fingerprints in the victim's blood at the scene of the crime. That is all circumstantial, but taken together, there seems only one reasonable interpretation.
The definition of "circumstantial evidence" from Law.con's legal dictionary reads:
evidence in a trial which is not directly from an eyewitness or participant and requires some reasoning to prove a fact.
The page goes on to state:
There is a public perception that such evidence is weak ("all they have is circumstantial evidence"), but the probable conclusion from the circumstances may be so strong that there can be little doubt as to a vital fact ("beyond a reasonable doubt" in a criminal case, and "a preponderance of the evidence" in a civil case). Particularly in criminal cases, "eyewitness" ("I saw Frankie shoot Johnny") type evidence is often lacking and may be unreliable, so circumstantial evidence becomes essential. Prior threats to the victim, fingerprints found at the scene of the crime, ownership of the murder weapon, and the accused being seen in the neighborhood, certainly point to the suspect as being the killer, but each bit of evidence is circumstantial.
The Britannica article on "Circumstantial Evidence" defines the term as:
circumstantial evidence, in law, evidence not drawn from direct observation of a fact in issue.
The page goes on to state:
If a witness testifies that he saw a defendant fire a bullet into the body of a person who then died, this is direct testimony of material facts in murder, and the only question is whether the witness is telling the truth. If, however, the witness is able to testify only that he heard the shot and that he arrived on the scene seconds later to see the accused standing over the corpse with a smoking pistol in his hand, the evidence is circumstantial; the accused may have been shooting at the escaping killer or merely have been a bystander who picked up the weapon after the killer had dropped it.
Merriam-webster's definition is:
evidence that tends to prove a fact by proving other events or circumstances which afford a basis for a reasonable inference of the occurrence of the fact at issue.
 See for example "Eyewitness identification: Effects of suggestion and bias in identification from photographs". In "Eyewitness Testimony (Scientific American, Dec 1974) Prof Robert Buckhout wrote:
Although such testimony is frequently challenged, it is still widely assumed to be more reliable than other kinds of evidence. Numerous experiments show, however, that it is remarkably subject to error.
See also https://www.scientificamerican.com/article/eyewitness-testimony/
See also "Eyewitness Identification: Should Psychologists be Permitted to Address the jury by Margaret J. Lane, 75 J. Crim. L. & Criminology 1321 (1984) where it is stated:
The unreliability of eyewitness testimony' is inconsistent with
the criminal justice system's reliance upon it.