Ring around the rosey is one of the sickest thing they teach to kids heres it's roots.
Back when the 'Black (Bubonic) Plague' was around, a ring would appear around the rosey part of the actually boil-like spot, hence 'Ring around the rosey,' People smelled very badly when having this disease , so they carried posies (type of flower) in their pockets to camoflage the smell hence 'Pocket full of posies,' When the people died, because the plague was contagious, they would burn the corpses to ashes hence 'Ashes, ashes' 'We all fall down.' was added because no one was surviving. Interesting, yeah?
A website for mothergoose truths
http://www.geocities.com/Athens/Forum/3041/