Its easy once you learn how. Get a large mouth full of smoke. Pucker your lips and curl your tongue into a half pipe. Next push the smoke out of your mouth very gently with the back of your throat.
Easy as that. Once you learn how you can get a rhythm going.
It's difficult to put in to words how exactly to do it... Ocelot did a pretty good job but I thought I'd add one thing: when I do it, I make an "O" with my mouth and sort of let the smoke just fall out haha barely pushing it out... Maybe a video would make more sense.
Now I can even blow double rings like a bull from a cartoon lol
Ahaha, this is one I always wondered about, too, especially after seeing huge smoke rings coming from the guns of battleships in old WWII documentaries!