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Loops are formed when the same broadcast domain has at least one circular L2 path.
In your example, if your 3 switches were "dumb" or, if "smart", the same VLAN was on all 3 connections, you've created a L2 loop.
When pc1 sends its first frame to pc0, sw1 will "record" the source mac was seen on the ingress port and then flood the frame to all other ports (as it doesn't yet know the dest mac port).
When sw2 and sw3 receive the flooded frames from sw1, each will record the src mac and flood to all other ports; one of which being pc0's.
However, sw2 and sw3 will then get the flooded frame from each other. Now, though, they will see the src mac from a different ingress port, and also again, flood to all other ports. Sw1 will receive the newly flooded frames from ports to sw2 and sw3, and it too will flood to all other ports. I.e. the frame is looping through the L2 ring. NB: for L2, there's no timeout, i.e. the frame will continue to loop.
