Looking at the heavens, we observe two basic sorts of motion, 1) the rotation of the whole sky and everything in it, from east to west, once a day, and 2) the much slower motion of the sun, moon, and the five naked-eye planets against the background of the fixed stars, in the opposite direction (most of the time–see comments about retrograde motion below), over longer periods that are different for each. (Ptolemy referred to the first as the “motion of the same” and the second as the “motion of the other.”) Needless to say, we now know that the motion of the same is caused by the earth’s rotation on its axis.
The moon gives the most obvious indication of the motion of the other, because it is fastest. Every night it rises about 45 minutes later than the night before, meaning it has moved east some distance. If you watch it over the course of the evening, you can observe it moving west to east in relation to the stars nearby. (All the time, of course, it is also being carried east to west with the rest of the sky. Think of it like walking backwards in a train that is moving forward.) In the course of a month (by definition), it will have completed a complete circuit of the sky and be back to (about) where it started.
The planets do this, too, but it takes quite a bit more patience to observe their eastward motions. But the ancients had lots of time on their hands, no TVs or Web messge boards, and a much better view of the night sky than we do today. So they noticed.
As I said, the sun exhibits the motion of the other, too. Of course, unlike the moon and planets, you can’t directly plot the position of the sun against the background of the stars because YOU CAN’T SEE THE STARS DURING THE DAY! But once you have accurate star maps of the whole sky you can infer the sun’s position by noting the stars directly opposite it. The sun’s path through the stars is called the ecliptic, and over the course of exactly one year (by definition), it will return to its starting point. This is the cycle the OP was asking about. It is, of course, the result of the earth’s annual revolution about the sun.
The ecliptic is NOT the same as the celestial equator (a projection of the earth’s equator onto the sky). It is angled at 23.5 degrees from the equator. If you think of two concentric rings joined at two opposite points and angled (i.e., having one shared diameter), you will see they create four natural dividing points: the two places where they meet, and the two points 90 degrees away, where they are farthest apart. The meeting points are the spring and fall equinoxes, and the other two are the winter and summer solstices. As Mangetout mentioned, these key points also served to mark the period of the year.
Now, even though you didn’t ask, as for retrograde motion, if you carefully note the positions of the planets every night over many years, you will see something strange. Some of the planets (specifically Mars, Jupiter, and Saturn) will occasionally appear to stop in their slow eastward “motion of the other,” and go “backwards,” to the west for a while, then stop and go eastward again. Over the course of several weeks or months they trace out a little loop against the stars.
Under the geocentric world view, this was very difficult to explain and quantify, and required elaborate mathematical mechanisms like epicycles, eccentrics, and equants (don’t ask). Under the heliocentric view it is much more simply explained as the earth “passing” the planet, like one car passing another on the inside of a turn. Although both are moving forward, to the people in the inside car, the outer one appears to be going backwards.
Mercury and Venus do not exhibit retrograde motion because they are between us and the sun, hence we never “pass” them.
I hope this is helpful.