A smoke ring is a pink discoloration of meat just under the surface crust (called bark). It can be just a thin line of pink or a rather thick layer. A good smoke ring is around 1/4 inch in thickness. The smoke rings is caused by nitric acid building up in the surface of meat, absorbed from the surface. This nitric acid is formed when nitrogen dioxide from wood combustion in smoke mixes with water in the meat. Basically it is a chemical reaction between the smoke and the meat.
So how to do you get the best smoke ring? Opinions vary. Generally water soaked wood produces more nitrogen dioxide loaded smoke. If you really want to make sure you get a smoke ring then cheat. Coating meat with a salt tenderizer link Morton's Tender Quick, will load up the surface of the meat with nitrogen dioxide and give you a great smoke ring. Because of the prevalence of this kind of cheating, smoke rings are no longer taken into consideration in barbecue competitions.