What is the difference between circulated and uncirculated buffalo nickel?

Clearly "uncirculated" means just that - the coin was never spent, but was obtained from a mint roll at a bank, or bought as part of a mint set. It has no wear and is either shiny or exhibits so-called toning, which is a kind of colorful tarnish that some coins acquire from exposure to the air.

A circulated coin is again exactly what it says - it's been spent and has been kicked about with other coins. Its condition may range from AU (Almost Uncirculated), which means that it may have been spent only once or twice and has essentially no wear, down to AG (About Good), which is so worn that you can barely identify the date and denomination.